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City University Research Journal (CURJ) is a 3. Dr. Razaullah, Assistant Professor, Department of specified, peer-reviewed and professional journal that Management Sciences, Islamia College University, is published bi-annually. It has received International Peshawar and Visiting Faculty at CUSIT. Standard Serial Number (ISSN) 2220-9174 from ([email protected])ISSN International Centre, Paris, France. CURJ invites contributions from researchers, scholars and 4. Dr. Qadir Bakhsh Baloch, HoD, Department of academics in the field of Social Sciences, Management Sciences, Islamia College University, specifically the Business Education. Peshawar, Pakistan.

([email protected])Objectives and ScopeThe objectives of the journal are : Foreign Members of Editorial Board? To open up new vistas of research for eager minds 1. Dr. Rosman Md. Yusoff, Professor, Department ? To unify the broad array of participants involved in of Human Resource Development, University of original scientific research in the relevant field. Technology, Malaysia.? To explore new information, new ideas and the ([email protected])

latest developments? To facilitate scholars and researchers in conducting 2. Dr. Colm Burns, Teaching Assistant, Department of high quality research and to publish their ideas, Management Sciences, Riddel Hall Block 1 02.016, UK. results and findings ([email protected])? To raise the quality of research according to international standards 3. Dr. Nazim Zaman

Lecturer in Finance in the School of Government and The scope of the journal includes the aforementioned International Affairs. Durham University, U.K.fields. Unpublished papers and extended versions of ([email protected]) papers presented at conferences may be submitted for possible publication in CURJ. Responsibility for the 4. Dr. Kashif Kifayat, Research Fellow, Department of contents of a paper rests upon the authors and not Management Sciences, Liverpool John Moors University, upon the editors or the publisher. Surveys and tutorial UK.papers are welcomed. ([email protected])

C Copyrights reserved with the City University of 5. Dr. Javed Ghulam Hussain, Professor of Science & Information Technology, Peshawar, Entrepreneurial Finance at Birmingham City Business Pakistan. School of Birmingham City University, UK.To obtain permission to reproduce or reuse text or ([email protected])images from CURJ, please contact the editor at : ([email protected]) 6. Dr. Farman Ali, Senior Data Analyst, University of

Toronto, Canada (Presently, Director IDS Agriculture Local Members of Editorial Board University, Peshawar) .1. Dr. Gohar Saeed Research Associate, ([email protected])Pakistan Academy for Rural Development, Peshawar, Pakistan.([email protected])

2. Dr. Shafiq ur Rehman, Assistant Professor, Department of Management Studies, University of Malakand, KPK, Pakistan.([email protected])

City University, RESEARCH JOURNAL (CURJ)

Chief EditorProf. Dr. Jehanzeb, Dean of Faculties, City University of Science & Information Technology (CUSIT), Peshawar, Pakistan

Associate EditorProf. Dr. Arbab Ikramullah, City University of Science & Information Technology (CUSIT), Peshawar, Pakistan.

PatronProf. Dr. Mohammad Asrar KhattakVice ChancellorCity University of Science & Information Technology (CUSIT), Peshawar, Pakistan

I

Permanent Referees/Reviewers 11. Dr. Kashif Kifayat, Research Fellow, 1. Dr. Qadir Bakhsh Baloch, HoD, Department of Management Sciences, Liverpool Department of Management Sciences, John Moors University, UK. Islamia College University, Peshawar, ([email protected]).Pakistan. ([email protected]) 12. Dr. Rosman Md. Yusoff, Professor,

Department 2. Dr. Muhammad Tariq, HoD, Department of Human Resource Development, University of of Mangement Sciences, University of Technology, Malaysia.Haripur, Pakistan. ([email protected])([email protected])

13. Dr. Colm Burns, Teaching Assistant, 3. Dr. Shafiq ur Rehman, Assistant Department of Management Sciences, Riddel Hall Professor, Department of Management Block 1 02.016, UK.Studies, University of Malakand, KPK, ([email protected])Pakistan.([email protected]) 14. Dr. Farman Ali, Senior Data Analyst,

University of Toronto, Canada (Presently, Director 4. Dr. Gohar Saeed Research Associate of IDS Agriculture University, Peshawar) Management Sciences, Pakistan Academy ([email protected])for Rural Development, Peshawar, Pakistan. ([email protected])

5. Dr. Razaullah, Assistant Professor, Department of Management Sciences, Islamia College University, Peshawar and Visiting Faculty at CUSIT. ([email protected])

6. Dr. S. Ghiasul Haq, Dean/HoD, Department of Management Sciences, Sarhad University of Science & Information Technology, Peshawar, Pakistan. ([email protected])

7. Dr. Shahid Jan, Assistant Professor, Department of Management Sciences, Abudul Wali Khan Universtiy, Mardan, Pakistan.([email protected])

8. Dr. Muhammad Mohsin, Director, Institute of Management Sciences, Peshawar, Pakistan.([email protected])

9. Dr. Muhammad Sajjad, Assistant Professor, Department of Management Sciences, COMSATS Institute of Information Technology, Attock, Pakistan.

([email protected])

10. Dr. Nazim Ali, Assistant Professor, Department of Management Sciences, Malakand University, Chackdara, Pakistan. ([email protected])

II

Message from Chief Editor

City University Research Journal (CURJ), a peer reviewed bi-annual academic journal serves as a forum for introduction and presentation for scrutiny of new research and the critique of existing research.

One of the objectives of City University of Science and Information Technology (CUSIT), Peshawar is to provide quality education and to improve the quality of Academic Research. CURJ is vigorously pursuing to achieve this objective by inviting research articles from leading academic authorities, early-career academics and research students at national and international levels.

CURJ welcomes contributions from the area Business and Management. Within this orientation the journal provides a focus for theoretical, applied and methodological work with strong emphasis on realistic analysis, the development of critical perspective, the provision and use of empirical evidence.

CURJ is an open access journal that publishes high quality solicited and unsolicited research papers, which should describe new and carefully confirmed findings.

I am honored with an opportunity and a responsibility to be Chief Editor of CURJ, which has a very rich editorial board having local and foreign members of high calibre and experienced scholars in the relevant fields.

The encouragement and co-operation extended by the Mr. Mohammad Sabur Sethi, President CUSIT, Prof. Dr. Mohammad Asrar Khattak, Vice Chancellor (Patron of CURJ) CUSIT and other team members made it possible to publish this fifth issue of the journal without any financial and technical barriers on authors.

I hope that by the grace of Almighty Allah, the CURJ will gain a glorious position among the existing research journals of social sciences and will shortly be assigned a higher category by HEC, Pakistan.

The detailed instructions for authors are reproduced on the last page of this journal.

Prof. Dr. JehanzebChief Editor, CURJ, (Social Sciences) City University of Science & Information Technology, Peshawar, Pakistan

III

Contents

PageTopic

151

IV

1. The Dynamics of Trading Volume Activity and Stock Returns:

A Case of Karachi Stock Exchange (KSE)

Arif Hussain

2. Consumption Pattern and Living Standard of Farmers in the Province

of Khyber Pakhtunkhwa.

Jehanzeb and Aamir Khan

3. The Significance of Research And Development For Economic Growth:

The Case of Pakistan

Jangraiz Khan and Naeem ur Rehman Khattak

4. Determinants of Financial Problems Among Male Students

Shahid Jan, Khursed Iqbal and Shams ur Rehman

5. Impact of Anomalies in Form of Islamic Calendar Date (Eid-Ul-Fitr) of Trading

Values on The KSE Stock Prices

(A Case of Five Random Companies From 30 Index of Karachi Stock Market)

Afnan Bin Sultan and Zilakat Khan Malik

6. Determinants of Customer Loyalty its Causes and Influences: A Study of Mobile Telecom Industry in Peshawar, Pakistan.

Murtaza Khurshid

7. The role of Philanthropic Activities For the Resources And Operations For Maintaining Strategic Position of Hospital(A case of Peshawar KPK government sector hospital of Khyber Teaching Hospitals)

Arshid Zia Sadiqui and Aamir Khan

8. Selecting an Appropriate Source of Media as an Effective Source of Promotion and Communication From ATL and BTL Modes of Advertising(A Study of FMCGs in Peshawar)

Haider Iqbal and Zilakat Khan Malik

9. Human Resource Management of Cellular Company in Pakistan, Finding the Balance in Standardization of Human Resource Policies and Practices(A Study of FMCGs in Peshawar)

Muhammad Islam and Raza Ullah

162

175

187

194

201

214

226

238

C 2013 CURJ, CUSIT 151

The Dynamics of Trading Volume Activity and Stock Returns:

A Case of Karachi Stock Exchange (KSE)

Arif Hussain

ABSTRACT

This study is about the interralshionship of the trading volume activity and stock returns

in the Karachi Stock Exchange (KSE). The monthly trading volume data and also the

monthly stock returns were taken for a period of 1995 to 2012. Both the series were

found to be stationary at level. The findings of the study show that the trading volume is

positively related to the stock returns. Further the results suggest that the ARCH effect is

not active i.e the past square residuals have no effect on the stock return volatility or

variations. While on the other hand the GARCH effects are present i.e the lagged

variances have a significant positive effect on stock returns. The value of λ is negative

and significant i.e trading volume volatility has a significant negative relationship with

stock returns in KSE.

Key Words: Trading volume, Volatility, Stock returns, causality

INTRODUCTION

The role of information is very much vital for the functioning of the modern day stock

markets. The information is processed in any of the efficient markets of the world thus

allowing the total capital in the market for a better economic use. The stock markets are

very much sensitive to information flow. According to Fama (1991) an efficient market

responds quickly, appropriately and fully to the available information in the market.

Thus the information, news announcements and the trading patterns in total may

become a major source of volatility in the markets.

The role of information can never be denied in the price formation of the stocks. Like

other factors which contribute to the price formation, trading volume has an important

contribution in explaining the stock prices and also it is a much studied area with in the

stock markets since long. Such studies also facilitate the understanding of the

microstructure of the financial markets. In this respect an understanding of the

relationship between the trading activity, stock returns and their volatilities have gained

much importance, and the understanding of such a relationship will further enhance the

investment decisions.

According to the efficient market hypothesis, the stock prices and the stock returns are a

replica of the available information in the market. With the new information, the market

participants change their expectations and cause the prices and the stock returns to

fluctuate. Therefore fluctuations in stock prices and stock returns are a reflection of the

reaction to the market information. Likewise, the investors also adjust themselves to the

trading volume. As according to the market folklore, the trading volume affects the

City University Research JournalVolume 03 Number 02 July 2013 Article 01

C 2013 CURJ, CUSIT152

stock returns and also the stock returns effects the trading volume, in either case it is a

reaction to the market news. Thus studying the dynamics of the trading volume and

stock returns further augments the microstructure of the stock market.

A number of researchers have studied the interrelationship between the trading volume

and the stock returns from various perspectives in the developed markets and also the

underdeveloped markets. The study of Granger and Morgenstern (1963) concluded

comprehensively the dynamics of the trading volume and the stock indexes. Epps and

Eppis (1976) also studied the relationship between trading volume and the square of the

price fluctuations. The studies of Clark (1973), Westerfield (1977), Harris (1986) and

Tauchen and Pitts(1983) have shown the effects of the Mixture of Distribution

Hypothesis (MDH) on the trading volume and stock returns. These studies show as to

why the daily trading volume is significantly and positively related to the stock returns

and how and why the squared returns are related with the trading volume.

The studies of Osborne (1959) and Rogalski (1978) show comprehensively the

relationship between trading volume and the stock returns in the future markets and also

in the spot market. Morgan (1976) in his study suggests trading volume as a dominant

risk factor in respect of the stock returns volatility in the emerging markets. On the other

hand the studies of Bohl and Henke (2003) and Ahmed et al (2005) proved this

relationship for most of the developed markets.

To prove the validity of the Mixture of Distribution Hypothesis (MDH) Lamoureux

(1990) and Lastrapes (1994) suggested that the volatility decreases as trading volume is

included in the GARCH model. Same results have been proved by Bohl and Henke

(2003) for Poland, Pyan et al (2000) for the United States markets. Conversely the

studies of Ahmed et al (2005) for the Malaysian markets, Salman (2002) for the Turkish

markets and Chen et al (2001) for the developed markets argue that the persistence in the

stock returns volatility exists by including trading volume in the conditional variance

equation. Such a relationship has also been explored by the Stoll and Whaley

(1990).Jones et al (1994) concludes a significant relationship between the trading

volume and the stock returns volatility for small firms. The individual stock returns and

not the stock index are found to be correlated with the trading volume as shown by

Meckenzie and Faff (2003).

The financial reforms let the financial institutions to absorb and respond to the changes

in the financial environment in any country. The financial reforms have brought

improvement to the financial sector in terms of competition, the introduction of new

products and also ensures the reduction of taxation by banks along with other financial

institutions (Gelb and Honohan 1990). Such reforms bring increased output and

enhanced growth rate, reduction in transaction cost and also brings improvement to the

financial position of the firms. The financial reforms are adopted by numerous

developed and underdeveloped countries across the world so as to have their positive

results.

Arif Hussain


Pakistan has started implementing the financial reforms policy since 1990's. These

reforms have upgraded the country rating since then. These reforms have also brought

improvement to a number of sectors in the economy and has also helped improve the

various financial indicators like the stock prices, exchange rate and the determination of

interest rates according to the market mechanisms of the demand and supply. It has also

revitalized the Karachi Stock Exchange (KSE) in terms of a better and improved

governance practices, risk management and control, the investor's protection and also

enhanced the transparency with in the trading activities. As a result, a reduction has

occurred in the volatility of stock market, number of listed companies were increased

and in the mean while also the capital market has gained a lot of depth since the

inception of the financial sectors reforms in the country. These reforms has has put the

Karachi Stock Exchange to move in the forward direction. As a result in the year 2002

the “Business Week” declared the KSE 100 index as the best performing index of the

world. The KSE 100 index reached a record high level of 14,814 as in December 2007

but due to the unstable political environment since 2008, the escalating militancy in the

country along with the ever increasing current account deficit and inflation has put the

KSE on a steep decline.

LITERATURE

Nowbutsing (2009) has studied the effect of trading volume on the stock returns and

volatility in the stock exchange of Mauritius for a period of 2002 to 2008. The various

ARCH family models, including the GARCH and GJR-TGARCH were used in this

respect in order to test the relationship. A weak form of positive relationship between

trading volume and stock returns has been confirmed in the stock exchange of

Maritious,Baklaci and Kasman (2010) suggested a positive relationship between

trading volume and stock returns volatility in the Turkish stock market. This particular

empirical study was based on the daily volume and prices of 25 firms listed in the

Turkish stock market during a period of 1998 to 2005. The GARCH (1,1) model was

used in this respect in order to confirm this relationship.

The empirical work of Wang (2004) has also confirmed a positive relationship between

trading volume and volatility in the United States stock markets. A total of 1789 firms

were taken in total to confirm the relationship during a period of 1988 to 2001. The

GARCH (1,1) model was applied to check the conditional volatility with in the trading

volume and the stock returns volatility.

Fleming et al (2005) argued that the trading volume has much ability to explain the

existence of the ARCH effects in the stock returns. The study was based on the 25 firms

in the New York Stock Exchange (NYSE) with in a period of 1993 to 2003. The

EGARCH and VA-GARCH were applied in this respect to ascertain this particular

relationship.

Medeiros and Doornik (2006) in a study of the Brazilian stock exchange has suggested a

REVIEW

The Dynamics of Trading Volume...


positive relationship between trading volume and the stock returns. They also argued in

their study that the stock returns volatility is also influenced by the trading volume. This

study was based on the data between 2000 and 2005. The empirical methods used to

conclude the results were GARCH models, Granger Causality tests, unit root tests and

also the correlation analysis.

Mahmood (2007) has studied the Malayasian stock market to reveal the dynamics of

trading volume and the banking stock returns. The GARCH modeling was incorporated

in this respect. The sample period was divided in two groups. The first was from 1995 to

1997, the before crisis period and the after crisis period of 1997 to 1999. The results

revealed that the stock returns are affected by the trading volume. It has also been

suggested that there are other variables that contribute to the banking stock returns

volatility in the Malaysian stock market.

Khan and Rizwan (2008) has empirically investigated the implications of trading

volume and stock returns, and their volatilities in the Pakistani markets. The KSE 100

index was taken as a case study in this respect and the data covered a time period of 2001

to 2007. The Granger Causality tests were used to test the causal relationship and the

GARCH models were used to assess the volatility of stock returns in the Karachi Stock

Exchange (KSE) because of trading volume. This study states that the trading volume

causes the stock returns and also the stock returns are causing the trading volumes in the

Karachi Stock Exchange. Also there has been evidences of stock returns volatility

because of the trading volume.

Darrat et al (2003) has studied all the stocks including in the Dove Jones Industrial

Average (DJIA) for the return volatility because of the different levels of trading

activities in the Dow. The EGARCH modeling was used to explore the dynamics of

stock returns volatility. The study concluded no positive relationship between the

trading volume and the stock returns volatility in the Dow industrial average.

Kumar et al (2009) has studied the stock market in India for 50 stock to reveal the

dynamics of trading volume and price discovery in the Indian markets. They conclude

that a positive relationship exists between the trading activity and the price discovery in

the Indian market. Also a two way causal relationship exists with in the trading activity

and the stock returns as has been proved by the Granger Causality tests.

Mubarik and Javid (2009) has studied the Karachi Stock Exchange for a period of 1998

to 2008 to investigate the impact of trading volume on the stock returns and their

volatilities. The GARCH-M model has proved that a significant relationship exists

between the trading activity and the stock return volatility in the Karachi Stock

Exchange. The results also reveal a positive relationship between market returns and the

trading volume. It has been also proved in the study that the previous day trading activity

is a determining factor for identifying the current day's stock returns in the Karachi

Stock exchange.

Ying (1966) documented the relationship between trading volume and equity

Arif Hussain


stock returns. His study proved a positive relationship between trading volume and that

of stock returns. Later on Harris (1986) proved again a positive relationship between

the trading volume and price movements. Lamourex and Lastrapes (1990) studied a few

highly actively traded stocks in the New York Stock Exchange to assess the information

effects of trading volume on the variances of stock returns. The results prove that trading

volume leads to the price volatility in the NYSE. Likewise the studies of Clark (1973),

Tauchen and Pitts (1983) and Najung and Yung (1991) all confirm a positive correlation

with in the trading volume and the stock prices.

DATA AND METHODOLOGY

Monthly trading volume and monthly 100 index returns of the Karachi Stock Exchange

(KSE) has been taken for this study. The data covers a time period from January 1995 to

December 2012.All the data was collected from the IFS (International Financial

Statistics) and the website of the Karachi Stock Exchange (KSE). Karachi Stock

Exchange is one of the biggest stock exchange of the country and also KSE 100 index is

the representative index of the KSE. KSE 100 index includes companies holding 85%

market capitalization. The relationship of the stock returns and trading volume is of

greater importance to the researchers and also variations in the stock returns is a subject

which is much appealing to the researchers and investors as well. Augmented Dickey

Fuller (ADF) test is used to ascertain the data stationarity. Since both the trading volume

and stock returns series should assume a constant mean and variance otherwise the

regression results will be spurious so for this purpose ADF tests are used. Correlation is

used to assess the relationship between the two series. Granger Causality assess whether

a single time series can cause the other or not. The GARCH estimates are used to

ascertain the conditional volatility within the two series. The compounded monthly

index returns are calculated as

Srt = 100*(Pt /Pt-1)

Statioinarity Checks

Most of the time series data are assumed to be non stationary. In order to conduct a valid

time series tests we must assume that the series we are using must be stationary

otherwise the results will be spurious. A stationary time series must satisfy the following

three basic requirements. First a time series must have a constant expected value,

secondly a time series under consideration must have a constant variance, thirdly a time

series should have a constant covariance with itself. The estimated results from a non

stationary time series will have no economic meaning i.e a non stationary series will

give spurious results.

So it must be determined first that whether the time series has got stationarity or not. The

most popular test used for this purpose is the Augmented Dickey Fuller (ADF) test. The

ADF test is used in order to determine whether there is a unit root in the time series or

not.



Augmented Dickey_Fuller tests whether ρ is equal to 0 or not.

∆srtt = α + γTrend + ρsrtt-1 + ΕΏ ∆Yt-1 + έt (1)

the ADF tests the null hypothesis (H0) against the alternative (H1) hypothesis

H0: Each time series has a unit root

H1: Each time series does not have a unit root

Table 1. Augmented Dickey-Fuller Test Results

The results of the Augmented Dickey-Fuller Test are presented in Table 1. The reported

results suggest that there is no evidence of a unit root in both the series as the Dickey

Fuller test statistics for both the series are less than the 5% critical values. So the null

hypothesis of non stationarity is rejected. Hence both the series are stationary at level.

Correlation Analysis

Correlation shows the strength of the relationship between variables. The correlation

coefficient shows how the two series are related. It can be computed as

r = Cov(X, Y)/ sx sy (2)

H0 : The correlation is equal to 0 (r=0)

H1 : Correlation coefficient is not equal to 0 (r ≠0)

** shows 5% significance level

The results show a positive relationship with in trading volume and stock returns. A

significant relationship has been found between these variables at 5% significant level.

GARCH Estimates

Here several models are discussed to test the effect of trading volume volatility on the

Arif Hussain

Series

Test Statistic

Probability Value

5% Critical Value

H0

Hypothesis

T_V -6.721200 0.0000 -2.8748 RejectedSRTs -14.49044

0.0000

-2.8748

Rejected

Table 2. Correlation between srt and trading volume

Series Correlation

Coefficient Prob. Value H0 Hypothesis

T_V 0.302 0.000**

Reject


stock returns and volatility. The Autoregressive Conditional Heteroscedasticity

(GARCH) estimates are used to model the conditional variance. To understand the

relationship between trading volume, monthly stock returns and variance two models

are estimated one without trading volume and the other with trading volume changes in

both the variance and mean form.

Here ω, β, α, ? 1, ? 0 are the constant parameters. While ε2t-1 , srtt-1 , σ2t-1, t_vt are

innovations, lagged returns, variance and interest rate volatility respectively.

Model 1:

Srtt = ? 0 + ? 1srtt-1 + εt (3)

σ2t = ω + α ε2t-1 + β σ2t-1 (4)

Model 2:

Srtt = ? 0 + ? 1srtt-1 + ? 2t_v + εt-1 (5)

σ2t = ω + α ε2t-1 + β σ2t-1 + λt_vt (6)

In the mean equation (4) the estimate of ? 2 is positive and significant. This suggests

that trading volume can predict the stock returns in the Karachi Stock Exchange (KSE).

The Model 1 variance equation shows that past square residuals are positively related to

stock returns but the results are insignificant as given in Table 3. The same results are

reported for the past square residuals even in Model 2. The past variances on the other

hand in Model 1 and Model 2 positively and significantly related to stock returns in the

KSE. This shows that the ARCH effect is not active i.e the past square residuals have no

effect on the stock return volatility or variations. While on the other hand the GARCH

effects are present i.e the lagged variances have a significant positive impact on stock

returns. The value of λ is negative and significant i.e the trading volume volatility has a

significant negative relationship with stock returns in the KSE.

Granger Causality

Granger Causality is used to test whether there is any association between the variables.

The Granger Causality is used only if there is any association between the variables and

Table 3. Estimates of Model 1 and Model 2? 0 ? 1 ? 2 Ω α β λ

Model 1 0.015340

(2.285262)

(0.0223)

0.021206

(0.260469)

(0.7945)

--

0.000594

(0.867711)

(0.3856)

0.033751

(1.010206)

(0.3124)

0.895875(8.461154)

(0.0000)

--

Model 2 -.078685

(-0.779215)(0.4359)

-0.076934 (-

0.511002)(0.6093)

1.94E-10 (2.569592)

(0.0102)

0.007551 (1.426548

)(0.1537)

0.150000 (0.907540

)(0.3641)

0.600000(2.177809)

(0.0294)

-1.51E-11(-

1.893797)(0.0583)



to see which variable is causing or moving the other variable.

H0 = Trading volume is not Granger Cause of stock returns

H1 = Trading volume is a Granger Cause of stock returns

The results suggest that neither trading volume is causing the stock returns nor the stock

returns is a granger cause of the trading volume as the results are insignificant at the 5%

significance level. The results are given in table 4.

CONCLUSION

This study is about the relationship between trading volume and stock returns in the

Karachi Stock Exchange (KSE). The monthly trading volume data and also the monthly

stock returns were taken for a period of 1995 to 2012. Both the series were found to be

stationary at level. The findings of the study show that the trading volume is positively

related to the stock returns. Further the results show that the ARCH effect is not active i.e

the past square residuals have no effect on the stock return volatility or variations. While

on the other hand the GARCH effects are present i.e the lagged variances have a

significant positive effect on stock returns. The value of λ is negative and significant i.e

the trading volume volatility has a significant negative relationship with stock returns in

the KSE. In conclusion, trading volume can explain the stock returns in the Pakistani

markets. Trading volume cause and move stock returns and is a common indicator for

investors to take investment decisions. Therefore investment strategies should be

designed according to the changes in trading volume.

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Arif Hussain

Table 4. Results of Granger Causality

Null Hypothesis

F-Statistic

Probability

α =0.05

T_V is not Granger Cause SRT 1.98954 0.13935 Not Rejected

SRT is not Granger Cause T_V

1.76227

0.17421

Not Rejected


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Arif Hussain

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Consumption Pattern and Living Standard of Farmers in the

Province of Khyber Pakhtunkhwa

Jehanzeb and Aamir Khan

ABSTRACT

The consumption pattern and standard of living are affected by economic efficiency of

farms. The economic efficiency is influenced by the agrarian structure of the province.

This study focuses on consumption pattern and standard of living of farmers in the

province of Khyber Pakhtunkhwa. The main objective of the research study is to identify

the consumption level and living standard of farms in the province. For the achievement

of this objective, four districts from different four ecological zones of the province were

selected on random basis. A sample size of 150 farmers was distributed among the ten

sample villages chosen from the selected districts. The regression models/consumption

functions have been estimated for the sample households.

The linear consumption function estimated for all the sample farmers has revealed that

the autonomous consumption is estimated at Rs.1074 per month, while the marginal

propensity to consume (MPC) at 0.70, implying that, on average the farmers consumed

70% of their increased income and the rest is saved. This finding is in conformity with

most of the developing countries. The high values of intercepts and MPC are attributed

to the large family size at the margin of break even point level of income. Thus the4

standards of living in terms of consumption is substandard. The 30% savings are the

compulsory savings like payments of debts. etc.

Key Words: Consumption Pattern, Living Standard, Agrarian Structure,

Economic Efficiency, Consumption Function, Dummy Variables and

OLS Method

INTRODUCTION

Basically Pakistan is an agrarian economy. The National Income, Production,

Consumption and standard of Living etc. are significantly affected by the agrarian

structure. Appropriate agrarian structure may improve the consumption pattern and

standard of living in the province of Khyber Pakhtunkhwa. This study seeks answer to

the following questions:

?Is the agrarian structure conducive to enhance the purchasing power of farmers

in the province?

?What is the level/pattern of consumption of farm households in the sample

area?



?Is the standard of living of farmers in KPK up to the standard?

However the specific objectives of the research article are as follows:

OBJECTIVES

An attempt has been made to achieve the following objectives:

?To ascertain the consumption pattern and level, the linear consumption

function has been estimated

?To determine the standard of living on the basis of level of consumption

?To assess the item-wise total expenditure and other facilities of the sample

households.

HYPOTHESIS

This piece of research has examined the following null hypothesis:

It is assumed that due to smallness of small farms and large in number, “The

consumption level of sample households is low and their standard of living is

substandard.”

LITERATURE REVIEW

This section focuses on the definitions of consumption pattern and standard of living.

Before to analyze the existing situation of consumption pattern and standard of living in

the province of Khyber Pakhtunkhwa, a very brief review in this respect has been

summarized below:

Consumption:

Consumption is the process in which the substance of a thing is completely destroyed,

used up, or incorporated or transformed into something else. Consumption of goods and

services is the amount of them used in a particular time period. The consumption of the

items like education, health, food items and sanitation etc may improve the standard of

living. However the consumption of goods and services are based on age of consumer,

which has been discussed as follows:

Mohammad Abdel-Ghany (1997) has considered data on 2,810 elderly households were

drawn from the Bureau of Labor Statistics 1990 Consumer Expenditure Survey.

Multivariate Tobit analysis was used to examine spending pattern differences between

households with a reference person aged 65-74 (young-old) and households with a

reference person age 75 and older (old-old). Significant differences in spending were

found for expenditures on food at home, food away from home, alcohol and tobacco,

housing, apparel and apparel services, transportation, healthcare, entertainment,

personal care, and personal insurance. The impact of socio-demographic factors on

expenditures by either age group was not uniform.

America is aging. Between 1980 and 1990, the number of elderly (those aged 65 and

Consumption Pattern...


over) grew by 22 percent compared with an eight percent increase for the population

under age 65 (National Institute on Aging 1992; Taeuber and Ocker 1992). The

proportion of elderly in the total population was 11.3 percent in 1980, 12.6 percent in

1990, and is projected to be 14 percent by 2010. Dramatic change in this proportion is

expected following 2010 when the baby boomers (those born between 1946 and 1964),

who comprised one-third of the American population in 1990, begin reaching age 65

(Hollman 1990; Taeuber and Ocker 1992).

Researchers do not agree on the age one is classified as “elderly.” Age 60, 62, and 65

have been used (Axelson and Penfield 1983; Moehrle 1990; Schwenk 1995). Two to

four age groupings among the elderly have been employed (Harrison 1986; Taeuber

1983). In this article, elderly households are divided into two groups based on the age of

the reference person, defined herein to be the husband in married couple families and the

household head in other family types: 65 to 74 (young-old) and 75 and older (old-old).

Age 65 is selected because it is the common age of retirement in the United States. The

sample is further divided at age 75 in an attempt to balance the sample size of the two

elderly categories and to recognize differences in marital status, health status, and

financial status that tend to emerge at this age (Crispell and Frey 1993; Culter 1991). The

purpose of this article is to test whether there are differences in spending patterns

between these two groups of elderly while controlling for the influence of selected

socio-demographic variables and to examine the influence of these socio-demographic

variables on the significantly different expenditure categories.

Standard of Living:

According to the American Heritage® Dictionary of the English Language, Fourth

Edition , updated in 2009. Published by Houghton Mifflin Company the definition of

the concept standard.

Standard of living is a level of material comfort as measured by the goods, services, and

luxuries available to an individual, group, or nation.

According to the Unite Nations Human Development Report 2010, over half of

Pakistanis are deprived of basic education and health facilities and live below a

respectable standard of living,. This report reveals that as many as 51 percent of the

population is living in multidimensional poverty and 54 percent is suffering from

intense deprivation.

Pakistan's overall ranking in terms of the Human Development Index (HDI) fell by two

notches and stood at 125 among 169 nations. Earlier, Pakistan's position was 123. This

means that Pakistan is now just two notches from a group of nations with low human

development and standard of living.

Of the deprived population, about three out of ten people are suffering from lack of

health facilities, five out of ten lack of access to education and at least four out of ten

have abysmal standards of living.

Jehanzeb et al.


The standard of living in Pakistan differentiates and varies between different classes of

society. Pakistan is a largely developing country and according to the Human

Development Index, is ranked 125th out of 169 countries, near the lower end of

“medium human development”.

The statistics have been measured by the Multidimensional Poverty Index which

includes indicators of health, education, sanitation and living standards. Pakistan's

overall ranking in terms of the Human Development Index (HDI) fell by two notches

and stood at 125 among 169 nations. Earlier, Pakistan's position was 123. This means

that Pakistan is now just two notches from a group of nations with low human

development. S

In a democracy there is scarcely any public question of greater importance than the

standard of living of the common people. It is essential to know the actual level of this

standard of living, and whether it is improving or deteriorating. There can be two types

of standards of living. One is the standard of living of the society as a whole, and the

other is the standard of a group within the society. It is perfectly possible for the standard

of the society as a whole to be improving, while that of one or more groups within the

society is declining. Moreover, if the distribution of economic power in the society is

very unequal, it may happen that the group, the standard of which is declining may

constitute a very large proportion, even a majority, of the total population.

RESEARCH METHODOLOGY

The province of Khyber Pakhtunkhwa is divided into four ecological zones from

climate, irrigation and type of soil point of view. For the purpose of this research article,

each zone has been considered as stratum. One district has been selected from each

zone/stratum, purely on random basis. It has been also proposed that a sample of 150

farmers from ten randomly chosen villages of selected districts will fairly represent

area. A combination of stratified and simple random sampling techniques have been

used. The proportionate allocation has been used for the distribution of villages among

districts and respondents among sample villages.

The agrarian structure (like farm size, tenure status and irrigation status etc.) plays a

very vital role in the economic efficiency of farms, which in turn predominantly

influences the consumption pattern and standards of living of the farmers. The more is

the economic efficiency of the farms, the higher is the level of consumption and

standards of living of the farmers. This study specifically examines the consumption

pattern and standards of living of the farmers. For this purpose different consumption

functions have been estimated for the sample farmers in the province, which are

analyzed in part 'A' of the subsequent section, however, a greater part of standard of

living is determined by the level of consumption, hence the estimated consumption

functions are also used for the measurement of living standard. while the remaining part

of the living standard has been determined in part 'B' of the same section as follows:



Regression Models/Consumption Functions

Consumption function refers to the income-consumption interrelation ship. J.M Keynes

propounded the fundamental psychological law of consumption stating that “men are

disposed as rule and on the average to increase their consumption as their income

increases but not by as much as the increase in their income”. This law identifies the

concept of Marginal Prosperity to Consume (MPC), which specifies the fraction of each

additional rupee of disposable income received to be spent on consumption. Thus, the

greater MPC implies the more consumption and in turn the higher standards of living

and vice versa. The vertical intercept of the linear consumption function, indicating the

level of consumption at zero level of income, also leads towards rising standards of

living with a rise of extent of intercept.

Specification of the Consumption Function

Multiple factors determine the aggregate consumption of the farm households. For this

study a few determinants of the total monthly consumption “C” (dependent variable)

have been taken into account. The most important among these is the net farm

household income (in Rs. Per month) “X1”, the rest of the explanatory variables are

family size “X2”, number of literate members “X3”. The three dummy variables “D1”,

“D2” and “D3”, or farm size, tenurial status and mechanization respectively are also

included in the model. The large farm is represented by unity and zero otherwise, owner

farmer is denoted by one and otherwise by zero, while mechanized farm is represented

by one and zero otherwise. In this way the numerical values of the dummy variables

“D1”, “D2” and “D3” for farm size, tenurial status and mechanization respectively are

also included in the model. The large farm is represented by unity and zero otherwise,

owner farmer is denoted by one and otherwise by zero, while mechanized farm is

represented by one and zero otherwise. In this way the numerical values of the dummy

variables “D1”, “D2” and “D3” have been obtained. Thus the consumption function for

the sample farmers become as follows:

C = f (X1, X2, X3, D1, D2, D3)

and the linear mathematical form is as under:

C = 0, + 1 X1 + 2X2 + 3X3 + 4D1 + 5D2 + 6D3 + U

Where “ 0” is the autonomous consumption, “ i” are the respective co-efficients and

“U” the residual term indicating the influence of all those factors which have not been

included in the model. As is obvious from the very nature of the variables, the total

consumption is positively related to the explanatory variables. Thus the expected signs

of all the parameters estimated would be positive.

It has been assumed that the different types of the agrarian structure viz. farm size,

tenure status and mechanization state would affect consumption differently. Therefore,

in addition to the above mentioned dummy variables model for all the sample farm

households, eight other consumption function for each category and one for all

Jehanzeb et al.


?

Estimation and Verification of the Consumption functions

Although the explanatory variables “X1” and “D1” are related to each other and are not

truly exogenous, but since they are also not perfectly linear related, therefore it is

assumed that there is no “multicollinearity” among them. Similarly it is also assumed

that the problems of “heteroskedasticity” and “autocorrelation” do not exist. Without

applying any appropriate test for the detection of these econometric problems and the

assumption of non-existence is one of the limitations of this study. Since, there is a

single-equation model for each category of farm, hence the Ordinary Least Squares

(OLS) method has been used for the estimation of the model. Holding the usual

assumptions of the OLS method, the parameter estimates “ 1” would be “blu” (best,

linear and unbiased) and consistent.

So far as the verification of the models is concerned, the results displayed in the

subsequent section indicate that all the models are statistically significant. In all case,

the coefficients of determination, R-squares have been greater than 0.5, hence the FITS

have been good. Higher values of F-ratios have also suggested that the estimated models

are overall significant. The standard errors verify that the individual parameter

estimates are statistically significant. Differences between the parameter estimates of

the consumption functions on small and large farms, mechanized and non-mechanized

farms and on farms operated by owners and tenants are tested, applying the

Chow F-ratio test mentioned earlier. The differences in all cases are statistically

significant.

Interpretation of the Consumption Functions

Applying the OLS method, the dummy variables model of linear consumption function

for all sample households has been estimated. The results obtained are as follows:

Figures in parentheses are the standard errors of the respective parameter estimates.

R-square, the co-efficient of determination has indicated that 59 percent variation in

consumption is due to the explanatory variables included in the model. The autonomous

consumption on average is Rs. 1074 per month, while the marginal propensity to

consume is 0.70, which implies that on average sample farmers have consumed 70% of

the increased income and the rest is saved. The situation is in conformity with most of

the developing countries. The standard of living in terms of consumption is not unusual.

The data has revealed that the family size and the number of literate members (students)

households without dummy variables have also been estimated.



have had a remarkable impact on the consumption of farm households. The co-efficients

of dummy variables have indicated that mechanization (D3) has relatively greater

influence on the consumption as compared to the farm size (D1) and tenure status (D2).

The relevant figures are 14.0, 13.3 and 12.3, respectively.

To compare the equality between parameters of the consumption functions on small and

large forms, separate functions have been estimated and the results are presented in

Table I below

Table 1. Results of the Estimated Consumption Function by Farm Size

The Chow F-ratio suggests that the parameters of the two types of consumption

functions are statistically significant at 5

The data indicate that the autonomous consumption (consumption at zero level of

income) of the large farmers have approximately been two times the autonomous

consumption of the small farmers. Clearly the standard of living in former case is twice

of that in the later case. The MPC (0.91) of the small farmers when are compared with

MPC (0.72) of the large farmer, indicate that the small farmers have been just in the

neighborhood of “break even” point of income. In other words they have been operating

their farms on the subsistence level. The co-efficient of “X3” on the large farms has

approximately been ten times higher than the corresponding figure on the small farms. It

infers that the fraction of spending on education has been significantly lower on the

small farms. The family size “X2” has added to the consumption of the large farmers at

the rate of 95.5, which is more than two and a half times of the small farmers. The results

of the pooled consumption function have indicated average of the two extremes of the

Jehanzeb et al.


Table 2. Results of the Estimated Consumption Function by Tenure

The intercepts of the consumption functions estimated for owners, owner-cum-tenants

and tenants have been Rs. 996, Rs. 803 and Rs. 401 respectively. Obviously the first

category is enjoying relatively higher standard of living as compared to the last

category. The respective MPCs are 0.75, 0.79 and 0.97, which indicate that owners are

in a position to save 25

So for as the impact of mechanization on consumption irrespective of farm size and

tenurial status is concerned, table 7.3 indicates that autonomous consumption of the

non-mechanized farm households has been one-third of the autonomous consumption

of the mechanized farm households. The respective levels are Rs. 364 and Rs. 1102 per

month. The MPCs indicate that the farmers on the non-mechanized farms have earned

income nearly equal to the break even point (zero saving level income), while

mechanized farmers could save 33

Table 3. Results of the Estimated consumption Function by Mechanization State


Other portion of standard of living

There are two main indicators which determine the standard of living. The first

examined in the preceding section have been the marginal propensity to consumption

and the level of consumption; the second are comprising of the item-wise expenditures

and provisions enjoyed by the households. An attempt is being made to analyze the later

indicator in this section.

Item-wise Expenditure

A detailed information has been obtained on item-wise expenditure of the farm

households. For determining standard of living, all those items have been categorized in

five main categories, and their percentages by farm size and tenure have been calculated

which are enumerated in the Table.

Table 4. Percentages of Item-wise Expenditure of the Sample Households by Farm size

and Tenure

The data indicate that in case of all tenures on all farm sizes, 43.73% of the expenditures

have been spent on basic essentials like food, clothes and shelter. Only 10% and 9.52%

of the spending have incurred on education and health. A very significant amount of

17.22% has been spent on customs/traditions, which is absolutely an uneconomic

expenditure.

Evaluating critically the situation on the small and large farms, the high percentages of

spending on food, clothes, shelter and education, and the corresponding lower

percentages of spending on custom/traditions and other items by the large farms, clearly

indicate their better standards of living.


Jehanzeb et al.


The same trend has been witnessed in favour of the owner farmers in comparison with

the tenant farmers.

Consequently, because of better efficiency of the large farms managed by owners

farmers the standards of living have enhanced; in case of the small tenants they have

been found deteriorating.

Provisions

Provisions of certain facilities like, radio/tape-recorder, television, dish-antena,

refrigerator, air-conditioner, motor car, etc. are also among the determinants, of the

standards of living.

CONCLUSION

The linear consumption function estimated for all the sample farmers has revealed that

the autonomous consumption is estimated at Rs. 1074 per month, while the marginal

propensity to consume (MPC) at 0.70, implying that, on average the farmers consumed

70% of their increased income and the rest is saved. This finding is in conformity with

most of the developing countries. The high values of intercepts and MPC are attributed

to the large family size at the margin of break even point level of income. Thus the4

standards of living in terms of consumption is substandard. The 30% savings are the

compulsory savings like payments of debts. etc.

The co-efficient of dummy variables used for farm size, tenurial status and

mechanization state have been 13.3, 12.6 and 14.9 respectively. This means that those

types of farming have had a significant impact on the level of consumption and the

standards of living.

The autonomous consumption of the small farmers has been approximately half of the

autonomous consumption of the large farmers. Clearly large farmers are enjoying high

standards of living as compared to the small ones. The higher MPC (0.91) of the small

farmer has indicated that they are nearly earning at a break-even point of income, or

below the subsistence income level.

In terms of consumption, the pure owners are relatively at a advantage than the pure

tenants. Similarly the households of the mechanized farms are more better off than the

non-mechanized farm operators.

The proportion of spending on basic needs (food, clothes and shelter), education and

health have been 45.79, 13.62 and 12.27 respectively on the large farms, while the

corresponding figures on the small farms are 41.68, 6.37 and 6.76.

Regarding spending on various items the same difference has been found between the

pure owners and pure tenants as is recorded in the case of the large and small farms.

The percentage of expenditure on uneconomic pursuits like customs / traditions has

been significantly higher (22.68) of the small than of the large farmers (11.94).

The majority (70.50%) of the small tenant farmers have had radio / tap-recorder only,



the 8.50% of the large owner possessed radio/tape-recorder with television and

refrigerator. With regard to the household's provisions, the small and tenant farmers

have been more worse than the large and owner farmers.

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Jehanzeb: Professor of Economics, City University of Science & Information Technology, Peshawar. Ph.D in Economics from University of Peshawar. More than 28 years teaching and research experience in Public Universities as Lecturer, Assistant Professor, Associate Professor , Staff Economist and Research Specialist; more than 25 research papers and 10 research publications; worked in various research projects for World Bank, IFPRI and UNICEF; supervised seven M.Phil and two Ph.D research scholars, two M.Phil and one Ph.D supervision in progress.e-mail: [email protected]

Aamir Khan: Student of Master in Economics, Institute of Development Studies, KPK, Agriculture University, Peshawar. Two years teaching experience at Higher Secondary School level. Published one research paper. Area of interest is applied economics.e-mail: [email protected]

Jehanzeb et al.


The Significance of Research And Development For Economic

Growth: The Case of Pakistan

Jangraiz Khan and Naeem ur Rehman Khattak

ABSTRACT

This paper concentrates on the significance of Research and Development (R&D) for

economic growth in the developing economy of Pakistan. The paper also questioned the

major macro determinants of R&D in Pakistan. The study used time series data for the

period 1971-2008. The results obtained from the Ordinary Squares Method showed that

R&D significantly affects the Real GDP per capita in Pakistan. Health, labour force ,

and Physical capital are among the other determinants of Real GDP per capita. The

results further show that real GDP per capita and quality of educational institutions are

the significant factors which affect R&D. The Johansen Cointegration test confirmed

the existence of long run relationship between R&D and economic growth. Similarly,

R&D and its determinants were also found in long run relationship. It is therefore

recommended to increase investment in R&D to achieve sustained economic growth. It

is also recommended to collect and record quality R&D data for effective policy making

in the field of science and technology, and social sectors in Pakistan.

Key Words: Research and Development, Economic Growth, Health, Labour

Force, Quality of Educational Institutions

INTRODUCTION

Pakistan is the 6th most populous country of the world comprising of 177.1 million

people. Being a developing economy, it is struggling hard to achieve sustained

economic growth. The economist and policy makers of Pakistan are working hard to

unveil the determinants of economic growth in Pakistan. Azam and Khattak (2005)

found Foreign Direct Investment, Domestic Investment and Trade openness as the

significant determinants of economic growth in Pakistan. It has not been so far able to

utilize its population optimally. Budget deficit and foreign debt are also considered as

important determinants of economic growth in Pakistan.

Iqbal and Ghulam (1998) declared primary education and physical capital as the pre-

requisites for economic growth of Pakistan. Education is considered an important tool

for economic growth and Pakistan will have to keep education on top priority in public

policies in order to achieve sustained economic growth (Khattak and Jangraiz, 2012b).

Similarly, health, Total Factor Productivity, and labour force are the long run drivers of

Pakistan economy and increase in expenditure on higher education can produce far

reaching results for economy (Khattak and Jangraiz, 2012a).

Research and Development (R&D) is emerging as another important tool for economic

growth in modern era. Its role in economic growth was also emphasized in New Growth



Jangraiz Khan et al.

Theories. R&D results in innovation, which improves the quality and quantity of

production. The research firms enjoy the monopoly benefits which they get after each

innovation but these benefits are destroyed by next innovation (Aghion and Howitt,

1992).Engelbrecht (1997) suggested diverse role of human capital and R&D in

domestic innovation and international spillover of knowledge. This spillover leads to

economic growth. Blackburn (2000) integrated Research and development with human

capital accumulation in an endogenous growth model and used the ideas of Lucas

(1988), Uzawa (1965), Grossmann and Helpmann (1989), and Romer (1990).These

studies recommend accumulation of skills and knowledge to achieve economic growth.

Human capital accumulation not only accelerates economic growth but also provides

incentives for research and innovations. It improves the quality of manufacturing.

Ballot et al (2001, Zeng (2001), Chou (2002), Jones (2002), Lee (2005), Kwack and

Yang (2006) and many other emphasized the role of R&D and education in economic

growth. Besides utmost significance of R&D for economic growth, unfortunately, the

R&D sector has not been successful to get proper attention of policy makers in Pakistan.

This paper seeks the significance of R&D in the economy of Pakistan during the period

1971-2008.

R&D and Economic growth Profile of Pakistan

The economic growth performance of Pakistan remained impressive during last few

decades. Agriculture, industry and services sectors have been and are still major

contributors to Gross Domestic Product (GDP) growth. However, the contribution of

agricultural sector is decreasing and the share of industry is increasing. The share of

agriculture to GDP, which was 53.2 % in 1950, fell down to 30.6% in 1980 and 23.3% in

2005 (State Bank of Pakistan, 2005). Industry which provided 9.6% of GDP increased

its share to 22.6%. Pakistan economy grew at the rate of 2 % during 2008-9 (Economic

Survey of Pakistan, 2008-9). When Pakistan came into being, its growth rate remained

3.14 % in its first decade. The low growth performance was due to agricultural and

industrial backwardness, low exports and developing trade relations. The growth

performance remained sustained during 1961-1970 but again fell to 4.6% in 1970s.The

biggest tragedy of Pakistan happened during this decade when Pakistan disintegrated

into two independent states, Pakistan and Bangladesh. The period 1991-2000 was a

comparatively relaxed period in Pakistan growth history.

and its economy grew at 6.15 % during this period. During this period Pakistan

experienced democracy from 1991 to 1998 and military government in the remaining

part of the decade. The economic growth rate remained 4.68% during the period

2001-2008. Pakistan annual growth performance has been shown in the following table

with comparison of growth performance of neighboring countries (SBP, 2005;

Economic Survey of Pakistan, 2008-09).

Research plays an important role in economic growth of a country through

technological advancement and spillover effects. Research and Development


The Significance of Research and Development...

expenditure can be more productive if made on high-tech sector than other sectors

(Nadiri, 1993).

In Pakistan, expenditure on R&D is mostly made by the government of Pakistan through

investment in higher education. Universities are considered home for research and

expenditure made on higher education does play an important role in R&D. There are

also few specialized organizations working for R&D in Pakistan. The research

expenditure and quality has improved in recent decades after the formation of Higher

Education Commission (HEC) of Pakistan in 2001.Before formation of HEC in 1976,

the number of publication in Pakistan was 271 per annum only (ISI, 2010).This number

almost doubled in 1984-85 when the number of publications reached 512. The 2000s is a

decade of research for Pakistan because the number of publication, number of research

organizations and expenditures on research all increased with acceptable pace. The

publications increased from1305 in 2000-01 to 7661 in 2008-09.

The expenditures in Research and Development (R&D) by a country show its interest in

science and technology and other sectors which lead to economic development. It has

been observed that rich countries of the world with huge pool of resources spend huge

amounts of money on R&D. During the year 1999-2000 the world expenditures on

R&D increased from 410 billion USD to 755 billion USD and out of this 80% was made

by OECD countries (UNESCO, 2004). Due to lack of availability of data on R&D,

expenditures on higher education was taken as proxy for R&D because in Pakistan most

research is conducted in higher education institution. Another justification for the use of

this expenditure as expenditure on R&D is that high correlation has been noted in higher

education expenditure and number of scientific publications.

As discussed above R&D sector is so far a neglected sector in Pakistan.It is spending a

meager percentage of its GDP on R&D as shown in the Table I. Pakistan spent 0.16% of

GDP on R&D in 1997. The expenditure on R&D fell in coming four years but a

frictional increase 2001. The R&D expenditure showed a visible expansion in 2005

(0.44% of GDP). The government of Pakistan realizing the importance of R&D,

increased the expenditure on R&D to 0.68% of GDP in 2007. The establishment of

Higher Education Commission (HEC) of Pakistan in 2001 is believed to be the major

cause of development of R&D sector in Pakistan


Table 1. Research and Development Expenditure as a percentage of GDP

Source: World Development Indicators (2010)

DATA AND METHODOLOGY

Data

This paper is based on secondary time series data for the period 1971-2008. The sources

of data are State Bank of Pakistan, Economic Survey of Pakistan (Various Issues) and

World Development Indicators.

Methodology

The empirical model for the present study has been derived from Khan (2012) as given

below

(1)

where

K= physical capital, L+ labour force He = Health and RD = Research and

Development

The model can be written in log x linear form as below

In equation (2), Y is the economic growth which has been measured by Real GDP per 4capita . Physical capital is measured by Gross Fixed Capital Formation (GFCF)

following the economic growth literature. Health is another important variable of this

paper. Life expectancy has been used as a measure for health in the present study.

Similarly, the labour denoted by L in equation (2) shows the total labour force in the

economy.

Year Pakistan India China Italy USA Australia


),,,( RDHeLKfY =


Research and Development (R&D) is another important variable inducted in growth

determinants in New Growth Theories. Much struggle has been made to get data for

R&D. Unfortunately, not much data is available on R&D in Pakistan. Only a few years'

publication data was available. As most of research is carried out in higher education

institutions in Pakistan, so the expenditure on higher education was considered a proxy

for it. This is also justified on the ground that high correlation was found between the

Expenditure on higher education and publication per year from 1975-2008. This means

that increase in higher education expenditure led to increase the research activities in

Pakistan so this proxy is being used in the present study.

In equation (3), RGDPPC is the Real GDP per capita, ENR is educational enrollment,

Edins means number of educational institutions and PTR which is the Pupil-Teacher

Ratio, shows the quality of educational institutions.

We employed different econometric techniques Ordinary Least Square, Augmented

Dickey Fuller Test and Johanson Cointegration test for analysis.

RESULTS AND DISCUSSION

The empirical section of this paper starts with the regression results. The study treated

Real GDP per capita as the dependent variable against a set of explanatory variables.

Health is considered as an important measure for human capital and as expected it

appeared as positive and significant variable in this study. This means that increase in

life expectancy leads to increase in real GDP per capita in Pakistan which is logical

finding. The results show that Research and Development in Pakistan positively affect

Real GDP per capita and the result is statistically significant. This points out the

significant role of R&D in economic growth of Pakistan. Another important variable of

the study was labour force. The study found labour force a positive and significant

contributor to the Real GDP per capita in Pakistan. The physical capital also remained

statistically significant variable but the sign is unexpectedly negative. The results are

displayed in the Table II

Table 2. OLS Results for Economic Growth Model

D = 0

Variable Coefficient Std.Error t-Statistic Prob.



The results from R&D model found Economic Growth, and quality of educational

institutions as the significant determinants of R&D in Pakistan. The Real GDP per

capita positively affects the process of Research and Development and the result is

highly significant. The coefficient PTR is negative but statistically significant. This

means that lower PTR which shows high quality of education accelerates the R&D

process while higher PTR (Lower Quality of Education) leave negative effects on R&D.

Similarly, the enrollment in educational institutions and the number of educational

institutions have positive relationship with R&D in Pakistan but the result is statistically

insignificant. The results can be seen in table III.

Table 3. OLS Results for R&D Model

The time series data can sometimes result in misleading results if the data is found non

stationary. If the data is found non stationary, then the long run relationship is checked.

Therefore we are using Augmented Dickey Fuller test for stationarity. The results have

been displayed in table IV and V. When the ADF test is conducted by using the

assumption 'With intercept but No Trend', all variables of the study appear as non

stationary at level. All variables become stationary when 1st difference is taken.

Similarly, when the test is revised with the assumption of 'With Trend and Intercept', all

variables are non stationary at level but they become stationary when 1st difference is

taken. Once, it is found that the data is not stationary at level, and then questions arise on

the validity of the OLS results. Therefore, to validate the OLS results, the long run

relationship is checked. Cointegration is considered as affective tool for this purpose.

Many tests are used for finding the cointegration but we are using Johansen

Cointegration (1988, 1991, 1995) test as all variables are stationary at 1st difference.

The results of Johansen cointegration test for model with Real GDP per capita as

dependent variable showed the existence of at most one cointegrating equation which

means the existence of long run relationship of economic growth with R&D. this

confirms the results of the OLS and shows that the results derived from the non

stationary data were not spurious. Similarly, the Johansen cointegration test results

derived from the R&D model also gives at most 1 cointegrating equation. This means

that the R&D is found in long run relationship with its determinants. The results can be



seen in Tables 4 and 5.

Table 4. ADF Test Results with intercept but No Trend

The Lag Selection is as per Minimum AIC Criteria.


Level 1st Difference

Critical Value P-Value

Variable

ADF-Statistic

Critical value

P-value

ADF-Statistic

1% 5%1% 5%

LRGDP

LTLF

LHEALTH

LRD

LEDINS

LPTR


Table5. ADF Test Results with Trend and Intercept

Lag Selection is as per Minimum AIC Criteria.

Table 6. Johansen Cointegration Test Results for the Model with

Real GDP Per Capita as Dependent variable

Level 1st Difference

Critical Value

P-Value

Variable ADF-

Statistic Critical value

P-value

ADF-Statistic

1% 5% 1% 5%

Re

su

lt

s


Hypothesized No. of CE(s)

Eigenvalue Trace Statistic

0.05Critical Value

None *

At most 1*

At most 2

At most 3

At most 4

Hypothesized No. of CE(s)

Eigenvalue Trace Statistic

0.05Critical Value

None *

At most 1*

At most 2

At most 3

At most 4

Prob.**


Table 7. Johansen Cointegration Test Results for the Model with R&D as Dependent

variable

CONCLUSION AND RECOMMENDATIONS

This paper concentrated on the role of R&D in the economic growth of Pakistan. It is

concluded on the basis of the study results that R&D is a significant determinant of

economic growth in Pakistan along with physical capital, health, and labour. Similarly,

Real GDP per capita and the quality of educational institutions are the factors which

affect R&D significantly. Research affects economic growth positively but the sector is

neglected so far in Pakistan. The expenditures on R&D in Pakistan are lower than other

developing countries of the region. Research in agriculture and industry is needed to

increase productivity. The gap between university and industry should be bridged up to

materialize the research in industrial output. It is therefore, recommended to increase

investment in R&D to put the economy on path of sustained growth. It is also

recommended to collect and analyze quality R&D data for effective policy making in

the field of science and technology, and social sectors in Pakistan. Increase in

investment in education will further accelerate R&D in Pakistan which will pave way

for sustained economic growth.

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Jangraiz Khan: He completed his Ph.D in Economics under HEC Indigenous Ph. D Fellowship Programme. He also availed the IRSIP award from HEC and visited University of Pisa, Italy where he worked on his thesis for six months during 2010-11. He has 12 research papers published in different national and international research Journals. His areas of interest in research are education, health, environment and economic growth. He is working as visiting faculty at City University of science and Information Technology and Institute of Management Studies, University of Peshaware-mail: [email protected]

Naeem ur Rehman Khattak: is Dean, Faculty of Social Sciences at University of Peshawar. He did his Ph. D from UK. He has extensive experience in teaching, admistration and research. He has published 70 research papers in different national and international journals. He has produced 10 Ph.D and 30 M. Phil. Students. Area of

interest is applied econometrics.e-mail: [email protected]



Determinants of Financial Problems Among Male Students

Shahid Jan, Khursed Iqbal and Shams ur Rehman

ABSTRACT

This study describes the financial problems among male students in Pakistan. It inspects

the effect of financial socialization, financial awareness, and financial mind-set, effect

of socialization agents and financial behavior on alleged financial problems among

male students. The sample of 225 male students was selected randomly from different

colleges and universities in Pakistan. A self-administered questionnaire was used as the

data collection tool. The results indicate that in order of priority, spendthrift attitude,

secondary socialization agents, conservative attitude, financial socialization and

financial behavior, directly foresee financial problems among the male students. In

addition, the results of indirect effects suggest that, financial socialization, spendthrift

attitude, financial awareness and secondary socialization agents indirectly effects the

financial behavior and financial problems.

INTRODUCTION

Historically, financial problems have been seen as a male-dominated role. In the field of

economics and finance, investigation covers the effects of gender on financial activities.

Both men and women with gender lens studies have demonstrated that different

socialization experiences of men and women differently understood through

money.Numerous studies (Rabow & Chamess, 1991? Rabow, Chamess, Aguilar, and

Toomajian, 1992) show that families using a number of diverse strategies for economic

socialization of boys and girls, such as keeping their daughters depends on ignorant with

money and vice versa giving more economic opportunities for boys. However, it is well

documented that economic socialization is the main step in providing financial

awareness, financial behavior and, therefore, future economic behavior. College

students are receiving more consideration from teachers financially, as they are the

future workforce participants. College students can be considered as a high risk cluster

in terms of economic stability and, therefore, prosperity, because of their tendency to

borrow, to finance their college education. Recent college graduates carry a significant

burden of debt and financial problems. (Leach, Hayhoe, & Turner, 1999). "Economic

Problems" The term generally refers to a mismatch between the resources and

requirements (Kerkmann, Lee, Lown, and Allgood, 2000). Economic troubles, in

accumulation to economic pressures, may add to other personal and family trouble.

Marcolin and Abraham (2006) noted that financial tribulations are frequently the

foundation for divorce; emotional stress, Mental illnesses, such as isolation, lowers self-

esteem and depression. The researchers found that college students had gender

differences in financial troubles, in which male students engaged in extra risky

financial manners. The findings of Masud, Rahim, Paim, and Britt (2004) among



students showed that men reported more

the studies of Henry, Weber, and Yarbrough (2001) found that female students have

more budget than men students. Similarly, Davies and Lea (1995) found that male

students carrying more debt as compare to female students. These findings indicate that

male students are considered to have a higher level of economic problems among

students. Economic research (Joo, 2008? Xiao, Tang, & Shim, 2009) has long

documented that economic performance is the major determinant of economic

prosperity, which, in turn, is effected by four foremost factors - economic stance,

economic socialization, economic factors and economic socialization skills. Students

learn economic behavior like others people in early life, however, is widespread among

researchers that the experience of the family, in particular, frequently give the basis for

the economic behavior of the student (Danes & Hira, 1986? Hira & Mugenda, 2000?

Watchravesringkan, 2008)

It is well recognized that economic socialization is influenced by the ideology of sex

parents (MOSCHIS & Churchill, 1978). The findings of Rabow and Newcomb (1999)

established the gender dissimilarity in financial socialization process and evidence has

shown that the different economic socialization would lead to differences in economic

behavior (Hayhoe, Leach, Turner, Bruin, and Lawrence, 2000). Masuo, Malroutu,

Hanashiro, & Kim, 2004) and economic knowledge (Chen & Volpe, 2002? (Goldsmith

& Goldsmith, 2006), which, in turn, lead to different results behavior (Dowling, Corney,

Hoiles & 2009? Xiao, et al., 2009). The study examined the effect of economic

socialization, financial position, financial literacy and financial behavior financial

problems among Malaysian students. Understanding the factor that can affect the

financial tribulations for male students will be constructive in helping to plan additional

successful financial education programs to organize young students to be successful

personal financial managers as they enter the work force market. Regarding the

significant role of women in the economy, such as the future workforce and the users of

the financial market, it is important to understand the factors that provide financial

problems together. Knowledge about the economic behavior of students and economic

problems is important as this economic behavior has a significant impact on the future

economic prosperity and overall satisfaction with their lives.

OBJECTIVE OF THE STUDY

The main objective of this study is to examine the effect of economic socialization,

economic attitude, economic knowledge, the influence of socialization representatives

and financial behavior is financial problems among students. College and university

students are receiving more consideration from teachers financially, as they are the

future workforce participants. College students can be considered as a high risk cluster

in terms of economic stability and, therefore, prosperity, because of their tendency to

financial problems than females.Furthermore,

Shahid Jan et al.


borrow to finance their college education. Financial socialization in this study is defined

as the process by which young people obtain knowledge, skills, and attitudes relevant to

their effective functioning in financial issues.

MATERIAL AND METHODS

The sample of the study consists of five public and private universities and four colleges

in Pakistan. Primary data were collected through self-administered questionnaire. For

each college and university, 25 students were randomly selected. A list of students

names were obtained from student affairs section. To determine the financial difficulty

only male students were considered. A total of 225 questionnaires were distributed and

200 questionnaires were returned. Response rate was 89 percent which is quite

satisfactory.

Dependent Variable:

In this study, financial problem is described as the inability to manage expenses and

familiarity the financial burden. To determine financial troubles, ten items were utilized

on a 4-point Likert scale and focused on problem such as financial planning issues and

cash flow management.

Independent Variables:

To recognize factors that envisage financial tribulations numerous factors were

recognized based on prior literature. Pecuniary socialization (financial experiences

during childhood), financial posture with spendthrift (negative attitude) and

conservative attitude (positive attitude), outcome of pecuniary socialization agents

(peer, media, mobile) financial acquaintance and pecuniary activities were measured as

predictors of financial tribulations among male university students. In this study, the

economic process by which young people's knowledge, skills and attitudes related to the

effective functioning of financial gain is defined as socialization. To determine this

construct, a ten-item instrument was measured, as a result, higher scores show prior

infancy financial familiarity and individuals who never had the familiarity were marked

as zero.

Econometric Model:

Path analysis (PA) was used to examine which factors had major effects on the financial

troubles among university level male students. PA in statistics is used to describe the

directional dependencies between a set of variables. This consists of models

corresponding to each form of multiple regression analysis, canonical correlation

analysis, and factor analysis. In this research study to conduct PA multiple regression

was used to get direct as well as indirect effects.

Determents of financial problems...


RESULTS AND ANALYSIS

Table1. Estimates of Coefficients for Factors Directly Predict Financial Problem

among Male Students

*Note: P value of * (p<0.05) refer to statistical significant at the 5 percent levels. 2 2 R= 0.408; R = 0.386; Adj. R = 0.16

The results presented in Table1 show estimates of coefficients for factors directly

predict financial problem among male students. Results showed that taken jointly all 2five factors envisage 38.6 % of variance in financial problem (R = 0.386). Spend thrift

attitude (b=0.201, P<.00), secondary socialization agents (b=0.156, P<.001), financial

socialization (b= 0.104, P<.00), and financial behavior (b= 0.080, P<.002) had a

constructive outcome on financial problems while conservative attitude (b= -0.140,

P<.002) had negative results on financial problems.

Table 2. Estimates of Coefficients for Factors Indirectly Predict Financial Problem

through Financial Behavior among Male Students

*Note: P value of * (p<0.05) refer to statistical significant at the 5 percent levels. 2 2 R= 0.282; R = 0.080; Adj. R = .074

The results presented in Table 4.1 demonstrate estimates of coefficients for factors

indirectly predict financial problem through financial behavior among male students.

Financial socialization (b=0.410, P <0.001), spendthrift attitude (b=0.380, P <0.001),

and secondary socialization agents (b=0.133, P <0.000), have strong indirect effect on

financial problem through financial behavior among male students. The results is

consistent with (Kim, Garman, & Sorhaindo, 2003; Lyons, 2008 ).

Shahid Jan et al.


Table 3. Results of multicollienearity

The above table shows the multicollinearity statistics and insight the information about

the multicollinearity. The standard value for tolerance value less than 0.20 or 0.10

indicates a multicollinearity problem (O.Brien & Robert, 2007). The table shows that

the tolerance values of all variables having no multicollinarinarity. The reciprocal of the

tolerance is known as the Variance Inflation Factor (VIF). The yardstick for the accepted

value of (VIF) must be 10 or less than ten and above it indicates the multicollinearity

problem (O. Brien & Robert, 2007). In the above table VIF values are less than the

standard value of VIF, so these values of the show no multicollinearity.

CONCLUSION

The study concluded that Financial Socialization squanderers attitude (like to spend

money irresponsibly), and secondary socialization agents (peer group, relative and

other media), have strong indirect effect on financial problem through financial

behavior among male students. The results indicate that in order of priority, squanderer

attitude, secondary socialization agents, conservative attitude, financial socialization

and financial behavior, directly anticipate financial problems among male students. In

addition, the results of indirect effects suggest that, financial socialization, squanders

attitude, financial awareness and secondary socialization agents indirectly effects the

financial problems.

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of Personal Finance, 3(1), 82-96.

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Perceive Money Differently? A Study of Asian and Asian American College

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and interpretation. SAGE Publications.

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Factors. Quality and Quantity 41(5), 673-690.

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life satisfaction of college students. Social Indicator Research, 92, 53-68.

Khurshed Iqbal: Lecturer, Department of Management Sciences, Brains

Degree College, Peshawar. MS in Finance from IBMS, KPK Agricultural

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e-mail: [email protected]


Impact of Anomalies in Form of Islamic Calendar Date

(Eid-Ul-Fitr) of Trading Values on The KSE Stock Prices(A Case of Five Random Companies From 30 Index of Karachi Stock Market)

Afnan Bin Sultan and Zilakat Khan Malik

ABSTRACT

The research paper examined the effect of anomalies in the form of Islamic calendar

date (Eid Ul Fitr). The study has taken five random companies from KSE 30-index with

time series data for time period of 2002-2011. The tools of measurement that were

adopted in the study consist of multiple regression model and correlation model to check

the relationship between independent and dependent variables. The study concluded

that in most cases there is a negative relationship between the trading value and the

stock prices and mostly found insignificant.

Key Words: Islamic calendar effect (Eid Ul Fitr), Trading Value, Stock Prices,

Karachi Stock Market (KSE), Anomalies.

INTRODUCTION

The stock market is affected by many financial and economic variables on a constant

basis like the country's inflation rate, unemployment rate, interest rate and many more.

Usually two calendar years are followed, these are Islamic and Gregorian calendar year.

In English calendar year there are special days like Labor Day, Poverty Day, and

Valentine Day etc. These special dates have some impact on the international Stock

markets which can be measured. Likewise, special days in Islamic calendar are the

month of Ramadan, Eid days (Eid-ul-Fitr, Eid-ul-Azha,) Eid Milad-un-Nabi, and Ninth

and Tenth of Muharram etc. These special Islamic days also have impact on the stock

markets.

In this research, the study wants to find the impact of the Eid-Ul-Fitr day on the Karachi

Stock Market. Pakistan is an Islamic state and it expected that there is great impact of

these Islamic anomalies on the Karachi Stock Market. For this, the study has taken the

Eid-ul-Fitr days from 2002 to 2011 and the trading value and stock price of five different

companies from five different sectors for the same time period.

Problem statement:

The stock markets get affected by many incidents like political instabilibity, national

holidays etc. In the same manner the Muslim world has some special religious activities

associated with special days related to Muslim Ummah and due to these days business

activities are affected. Eid-Ul-Fitr is one of these special days. Pakistan is an Islamic

country and Eid-ul-Fitr celebrated here as well. On this particular day the stock market

is closed so researcher wants to investigate its effect on the KSE when it opens for



trading after Eid-ul-Fitr holidays.

Purpose of study:

In this research study the researcher wants to evaluate the relation between Eid-Ul-Fitr

and the fluctuations between the stock prices in the Karachi stock market. In order to

examine the impact of Eid Ul Fitr on the stock prices listed on the Karachi stock market

the study has taken five different company from five different sectors in order to

indentify and understand more properly the variations in stock prices due to Eid Ul Fitr.

Significance of the study:

A lot of work has been done on the calendar effects on the stock market. Likewise, the

Islamic calendar anomalies are one of it and have been observed empirically by the

academic researchers for last couple of years especially in Islamic countries around the

globe. As it has been observed that all Islamic calendar anomalies have affected the

stock markets, it is expected that Pakistan is an Islamic state, therefore the Karachi stock

market will get affected by these anomalies. This study will contribute to literature by

coming up with evidence highlighting the effect of Eid-Ul-Fitr on the KSE stock prices.

LITERATURE REVIEW

The Islamic calendar anomalies are becoming very researchable topics that lay its

impact on the stock markets. A lot has been already done in this regard. According to the

Mustafa, K. (2011) in Karachi stock market is more risky in the month of Ramadan as

compared with other months. He investigated the Islamic calendar anomalies, the

month Ramadan, with the conditional and unconditional risk analysis. The study found

that in the holy month of Ramadan Karachi stock market is highly volatile and riskier.

The study used five different models including simple regression model with the error

term and found that Ramadan has great negative relationship with the stock market

performance.

Shahid and Muhammad (2007) examined the calendar anomalies in different stock

markets of Pakistan using data from 1991 to 2006 on daily, weekly and monthly basis

the returns on stocks. The statistical techniques used for the study were ANOVA and F-

test. The findings suggested that their no shorter effect like weekly or monthly by

calendar anomalies on the stock returns although the markets is often inefficient in short

run in Pakistan in stock returns. Fahad, A. (2012) also worked on the Islamic calendar

anomalies in twelve different countries most of them were Islamic countries with an

objective to examine the returns on stock returns in the month of Ramadan. The

researcher findings concluded that there is positive effect on stock returns in the month

of Ramadan specially in Turkey, Kuwait, Jordan and Pakistan.

Peter and Asgar (2003) worked on the calendar anomalies that may cause

disequilibrium in the stock market performance in the specific time period. They

Impact of Anomalies...


applied the test on the stock indices of countries like Hong Kong, Germany, France,

Denmark, Norway, Italy, Japan, USA, UK and Sweden. The researchers found that the

calendar anomalies may affect the small stock markets on small scale but in the big stock

markets the calendar effects is ignorable or almost no effect. Jedrzej and Ahmad et al.

(2008) investigated the effect of month of Ramadan on stock return in 14 Muslim

countries. The study suggested that the positive relation between the month of Ramadan

and the stock returns. Moreover the results showed a bit higher volatility in the stock

returns as compared with the other months.

Contrary to this, Husain (1998) investigated the Pakistan's stock market in the month of

Ramadan and results showed that there is less volatility in stock returns as compared

with the other months of the year, although researcher did not considered the average

mean return before and after Ramadan. Cooper et al. (2006) also investigated the

calendar effects on the stock market performance and their impact on the stock return.

Their study focused on the January effect on the stock performance. As these are the

starting days of New Year and people celebrate the New Years Eve so it is reflected on

the stock market performances as well the study found significant positive effect on

stock return. Wong (1990) used linear regression and correlation model for the study

and showed a negative impact of month of Ramadan on the stock market performances

of Malaysia.

HYPOTHESIS OF THE STUDY

H1: Eid-ul-Fitr has pre anomalies effect on the Stock Prices of KSE.

H2: Eid-ul-Fitr has post anomalies effect on the Stock Prices of KSE.

Research Methodology:

In order to examine the effect of Eid-ul-Fitr on the KSE comprehensively, the study

collected data from 2002 to 2011 of randomly selected five different companies from

five different sectors. The data has been quoted from the Karachi Stock Exchange

official website and from business recorder website. Dates of Eid-ul-Fitr, trading value

and stock price are the variables of the study. The data is then analyzed using multiple

regression model and correlation techniques. The selected companies and the sectors

for the study are listed as follows;

Afnan Bin Sultan et al.

Companies Sectors


EMPIRICAL FINDINGS

Table 1. Descriptive Statistics

Pre anomaly average trading value for PSO, PNSCL, IMCL, SCI and KESC was

1.5651E9, 1.9467E6, 1.2269E7, 8.5767E4, and 4.4109E6 respectively. The respective

standard deviations for the companies were 1.51591E9, 3.08383E6, 1.34251E7,

9.90164E4 and 2.99544E6. In Pre anomaly trading value, the highest average value is of

SCI (8.5767E4) and lowest is of IMCL (1.2269E7) and the highest variation from

average is of SCI (9.90164E4) and lowest of IMCL (1.34251E7).

A Pre anomaly average Stock price for the above mentioned companies was 4.4794E10,

6.1340E9, 1.2622E10, 2.1240E7 and 3.2779E10 respectively. The respective standard

deviations for the companies were 1.79929E10, 3.46819E9, 6.63765E9, 1.46682E7

and 1.67835E10. In Pre anomaly stock price affect the highest average value is of

PNSCL (6.1340E9) and lowest is of IMCL (1.2622E10) and the highest variation from

average is of IMCL (6.63765E9) and lowest of SCI (1.46682E7).

Post anomaly average trading value for PSO, PNSCL, IMCL, SCI and KESC was

2.8350E9, 3.0400E6, 1.0908E7, 3.8725E4 and 4.3984E7 respectively. The respective

standard deviations for the companies were 2.71294E9, 4.00444E6, 1.36451E7,

2.86717E4 and 8.62058E7. In Post anomaly trading value, the highest average value is

of KESC (4.3984E7) and lowest is of IMCL (1.0908E7) and the highest variation from

average is of KESC (8.62058E7) and lowest of IMCL (1.36451E7). A Post anomaly

average Stock price for the above mentioned companies was 1.1596E11, 6.4938E9,

2.7066E10, 2.1838E7 and 3.2124E10 respectively. The respective standard deviations

for the companies were 2.10722E11, 3.89764E9, 4.24371E10, 1.75255E7 and

1.45652E10. In Post anomaly stock price, the highest average value is of PNSCL

(6.4938E9) and lowest is of PSO (1.1596E11) and the highest variation from average is

of IMCL (4.24371E10) and lowest of KESC (1.45652E10).



Table 2. Regression Findings

The Table results shows that the impact of unit Pre trading value of first company is

producing -1.590 change with insignificant value .695 and t-test is also not acceptable

because it is -.416 below 2 and the impact of unit in post trading value of first company is

producing -.408 change with insignificant value .422 and t-test is also not acceptable

because it is -.894 below 2. The impact of unit Pre trading value of second company is

producing 1027.608 change with significant value .099 and t-test is also acceptable

because it is 2.136 above 2 and the impact of unit in post trading value of second

company is producing 442.006 change with insignificant value .473 and t-test is also not

acceptable because it is .792 below 2. The impact of unit Pre trading value of third

company is producing 288.148 change with insignificant value .355 and t-test is also

not acceptable because it is 1.044 below 2 and the impact of unit in post trading value of

third company is producing 469.579 change with significant value .091 and t-test is also

acceptable because it is 2.217 above 2. The impact of unit Pre trading value of fourth

company is producing -44.120 change with insignificant value .858 and t-test is also not

acceptable because it is -.226 below 2 and the impact of unit in post trading value of

fourth company is producing 485.300 change with insignificant value .447 and t-test

is also not acceptable because it is .939 below 2. The impact of unit Pre trading value of

fifth company is producing -2688.842 change with insignificant value .217 and t-test is

also not acceptable because it is -1.411 below 2 and the impact of unit in post trading

value of fifth company is producing -34.348 change with insignificant value .136 and t-

test is also not acceptable because it is -1.861 below 2.

DISCUSSION AND RECOMMENDATIONS

The results showed negative and insignificant relationship in most of the cases, as the

results of correlation of company 1, 4, 5 show there is negative and insignificant

relationship between the trading value and the stock prices, while only company 3

results show that trading value and stock prices have positive and significant

Beta value t-test Sig. level



relationship. While

between trading value and stock prices. The results of regression analysis show that

company 2 pre trading value and stock prices have significant relationship and

according to t-test their relationship is acceptable, company 3 post trading value and

stock prices have significant relationship and according to t-test their relationship is

acceptable, while in all other cases the relationship is negative, insignificant and the

results are not acceptable according to t-test. So the study shows that the relationship

between trading value and stock prices in case of Islamic calendar anomaly (Eid-ul-Fitr)

is negative. The research study results in comparison with the previous researcher's

show their research findings also proved that in most of the cases there is negative

relationship between the trading value and stock prices in case of Islamic calendar

anomaly (Eid-ul-Fitr).

CONCLUSION

Conclusively the research study proves that the relationship between trading value and

stock prices in case of Islamic calendar anomaly (Eid Ul Fitr) is negative in most of the

cases, only company 3 result shows that trading value and stock prices have positive and

significant relationship, company 3 post trading value and stock prices have significant

relationship and according to t-test their relationship is acceptable, while in all other

cases prove the relationship is negative, insignificant and the results are not acceptable

according to t-test.

RECOMMENDATION

Anomalies have influential impact therefore these financial behaviors required to be

considered for rational investment decisions. There should be approachable and

calculatable statistical information available to promote sound financial investment

decisions. The stock prices fluctuations after these types of anomalies must be

highlighted in stock prices to guide investors in better decision making. The Islamic

calendar anomalies effects should be considered in future decision making and further

investments. The Islamic countries stock markets mostly get affected by these types of

anomalies so they must take preemptive decision to update and manage the stock prices

in respective stock markets. Further work must be done in this manner so that further

profitable finding should be gained which guide in making good decisions.

REFERENCES

Ali, S. & Akbar, M. (2007). Calendar effect in Pakistani stock market. International

Review of Business Research Papers, 5, 389-404.

Cooper, M., John, McConnell and Alexei Outchinnikov (2006). The other January

effect. Journal of financial economics, 82(2), 315-341

company 2 results show positive but insignificant relationship



Fahad, A. (2012). The Islamic calendar effects: evidence from twelve stock Markets.

International research journal of finance and economics, 87, 85-191.

Hussain, F. (1998). Seasonality in the Pakistani stock market. The Pakistan

development Review, 37(1), 77-81.

Jedrzej, B., Ahmed. E, & Tomasz, P. W. (2003). Piety and Profit: stock market anomaly

during Muslims holy month. JEL classifications G12, G14, 1-55

Khalid, M. (2011). The Islamic calendar effect on Karachi stock market. Pakistan

Business review, 562-574.

Peter, R. H. & Asger, L. (2003). Testing the significance of Islamic calendar. 1Brown

University, Department of Economics, Box B, Brown University, Providence,

RI 02912, USA, Phone: (401) 863

Wong, P. N., Lee, K., and Thong, T. (1990). Seasonality in the Malaysian stock market.

Asian Pacific journal of management sciences, 7, 43-62.

Afnan Bin Sultan: Lecturer, Department of Management Sciences, Qurtuba University Hayatabad, Peshawar. MS in Finance from Gandhara University Peshawar. MBA in Finance from CECOS University of Peshawar. Published one research paper. Area of interest is applied finance. [email protected]

Zilakat Khan Malik: Associate Professor of Economics, Department of Economics, University of Peshawar. Ph.D in Economics from University of Peshawar. During 23 years teaching experience, taught various subjects of Economics as Lecturer in Islamia College University, Peshawar, as Assistant Professor in Peshawar University and as Professor of Economics in Kardan University, Kabul, Afghanistan. More than 19 Research Papers. Area of interest: Social Sciences, International Economics, and Development Economics. e-mail: [email protected]



Determinants of Customer Loyalty its Causes and Influences:

A Study of Mobile Telecom Industry in Peshawar, Pakistan.

Murtaza Khurshid

ABSTRACT

The purpose of this study is to investigate the determinants customer loyalty in the

Telecom Industry in Peshawar, Pakistan and to analyze its causes and influences.

Telecommunication service providers have a great role in strengthening the economy,

encouraging the efficiency of telecom users in the country. Customer loyalty and

satisfaction are necessary for the success of every firm.In Pakistan there are five mobile

phone service providers operating in the market i.e. Ufone, Mobilink (Jazz), Telenor,

Warid and Zong. So this study is conducted in order to find out those major variables

that are causing customers' loyalty in telecom industry. eighteen major hypotheses are

identified by the study that have impact on the customers' loyalty. Target market of this

study is university students. 160 Questionnaires were distributed among students of City

University of Science and IT, Preston University, Edwards College Peshawar, Abasyin

University and University of Peshawar Khyber Pakhtunkhwa, Pakistan. On the basis of

non probability convenient sampling, questionnaires were distributed for the collection

of primary data, using the non probability (convenient) technique. Regression analysis,

descriptive statistics and correlation are used for analyzing the statistical part of the

data. IBM, SPSS Statistics Version 20 is used for generating the results. The results are

then interpreted for each statistical process. The study revealed that customer

satisfaction, switching barriers, price, promotion, sales promotion, customer trust,

corporate/brand image, service quality, customer care service, value added services,

network coverage, signal strength, call Packages or rates, call quality/call rates, SMS

rates, SMS Quality, GPRS rates and GPRS quality are the important factors causing the

customers loyalty in telecom industry. A significant relationship exists between all these

independent and dependent variables.

Key Words: Customer loyalty, Coverage, GSM, Value Added Services, Cellular

Industry, Telecom, Switching Barriers.

INTRODUCTION

Telecommunication refers to sending and receiving or exchanging messages and

information through electronic medium such as mobile phones and telephone. The rapid

development and growth in the telecom sector has made Pakistan telecom service

market more competitive.

Pakistan Telecommunication Authority (PTA) was set up In 1994. It is the Pakistan's

first independent telecommunications regulator and the government owned Pakistan



Murtaza Khurshid

Telecommunication Company Ltd (PTCL). Pakistan telecom market is growing very

rapidly. Presently, in Pakistan there are five mobile phone service providers in the

market i.e. Ufone, Mobilink(Jazz), Telenor, Warid and Zong.

According to the Pakistan Telecommunication Authority (PTA), by the end of 2012 the

total number of cellular subscribers has reached 120,151,235 (120 million). They are

contributing Rs 363 billion during the year 2012, making an improvement of 5.4 percent

compared to last year. The estimates of data on provinces basis revealed that Punjab has

consumer base of 60.67 million, Khyber Pakhtunkhwa 10.28 million, Sindh 30.40

million, Balochistan 4.06 million, and Azad Jammu and Kashmir and Gilgit Baltistan

7.37 million.

This paper investigates and analyzes the relationship of various factors or determinants

that are impacting the customers' loyalty in the telecom cellular users of Peshawar,

Pakistan. Customer loyalty is considered a very important factor for the survival of

Telecom Company.

LITERATURE REVIEW

Customer's Loyalty:

Customer's loyalty means to build, create, maintain and sustain a long term emotional

and functional relationship with customers. The successful existence or and long term

future oriented development of the company is totally dependent on the importance of

their loyalt customers that are closely attached and related emotionally with them. If the

company is able to build, create and maintain long term relationship with the customers

then the company can get competitive advantage through their loyal customers over the

competitors. It can grow, develop and succeed in the long term more efficiently and

effectively even in the strong competitive environment or market. (Andres, 2007).

Customer's Satisfaction:

Customer satisfaction means that how much the current customers are happy and

motivated from the company. It is widely believed that for the growth and successful

existence of any vendor or the company, a large number of customers must be available

in the market, (Boohene Rosemond, 2011). Those customers that are satisfied with the

company show positive, favorable and supportive feedback toward the company by

purchasing its product and service and also to be related with them for long period of

time. (Jessy, 2010).

Customer Trust:

The customers trust has both impact on the purchase behavior and decision of the

customers. It shows their ability to be loyal with the company and give favorable and

positive feedback to them over the competitors. The customers trust is not only helpful

and beneficial when the company is in good stable mode but also it is a main source for


Determinants of Customer Loyalty...

the customers to be in the market and to remain in the market even when there is high

level of uncertainty for the company or suppliers in the current market situation.

(Jessy, 2010).

Corporate/Brand Image:

The corporate/brand image means the perception or the personal opinion of the

customers when they hear about the brand or when they see it or more specifically when

they experience it. That personal point of views or opinions or the ideas that are

generated by the customers are known as the brand image. (Bezos, 2008). It helps the

customers to easily differentiate one brand from the other brand. It is not only the

conceptual visualizations of the attached features and characteristics of the brand but it

also has the power and ability to effectively communicate and convey the idea, view,

message of the company, product or service in the mind of the end users or the

customers.

Switching Barriers:

The switching barriers refer to all type of emotional, psychological, physical,

operational and financial hurdles and problems arises from the customers to stop using

service of one supplier or company and then to invest a lot of time, money, information

and in finding another company, vendor or supplier that has the ability to satisfy the

customer need in a more effective way. All these difficulties and hurdles, barriers that

are faced by the customers are known as the switching barrier or simply the costs that are

incurred by the customers by leaving one vendor or supplier and move to another.

(Moshe, 2012).

Service Quality:

The combination of all those attributes and benefits that are associated with the product

or service. It also includes the ability to efficiently and effectively meet all the

requirements of the customers. (McGraw-Hill, 2002).

Price:

Price means the interchanging of financial values of one product or service between two

or more person that are participating in this exchange. In the mobile telecom market

specifically the cellular mobile phone service provides the benefits to the customers and

inturn the customers are paying a price. So price is playing a vital role in building and

communication customer loyalty. Studies have revealed that those telecom service

provider companies that are charging their customers low, have comparatively high

ability to grab the intention of the large number of customers.

Customer Care/Service:

Providing supportive and friendly communicative feedback to the customers before as


well as after the purchase from the company by the employees and other management

people to their customers is known as customer care service or simply customer support.

It has positive favorable impact on increasing the loyalty of the customers toward the

company and its service and products. (Customer Management IQ, 2012). So that

customers can easily exchange information with the company and can also get

knowledge from them regarding the company and its product.(Margaret, 2007).

Promotion:

Promotion is non personal but is paid activity of communicative nature done for

conveying the information from the company to their customers while building a

profitable relationship with them. (Morello, 2012). Promotion or more specifically

advertising are the important aspect of any growing business. It also creates customers

loyalty by gaining the competitive advantage in the market. The promotion also clear

the idea of the customers that the current company has the best product and service

available in the market on all aspects whether its price, quality, availability or any other

related factor. (Chen, 2011).

Sales Promotion:

Sales promotion includes all those activities carried out by the company directed toward

their customers with the aim of motivating & impacting them. It can increase the rate of

purchase and can also improve the customer's behavior towards the company. It also

boosts their purchasing activity. The sale promotion has only one big motive to amplify

the sales for the company and many customers purchase many service and products

from the company. (Marla, 2012). The sale promotion activities are very effective in

increasing the sales because it helps the company or suppliers in attracting not only their

customers but also those customers who are dissatisfied from the company (Gallato

Cristina, 2012).

Value Added Services:

The value added services are those interrelated combination of services that further

improve the quality of the service and product and also add value to the primary product

or service of the company. The value added service is for the purpose of encouraging the

behaviors of the customers and do more and more purchase of the primary main offering

of the company. (Wikipedia, the free encyclopedia, 2013). The purpose of value added

services is to increase the market share for the company by making the customers more

loyalt toward the company and by getting a competitive edge and advantage over the

competitors in a market.

Network Coverage:

Network coverage is very important to the service provider to make sure that their

cellular service is available and is working best in all the places without having or

Murtaza Khurshid


causing any troubles to their customers. If the cellular service provider fails to provide

full exposure coverage in the terms of accessibility through mobile cellular service

(Mohd Rozhan Nik Ismail, 2010) It will cause the customers to be unhappy and

demotivated and eventually decrease the loyalty of the customers that is not good for

them.

Signal strength:

Signal strength means the voice quality of the cellular service. If the signals are better,

the customers will feel happy and if in case the signal strength of any company is poor

then consequently it will badly impact and will cause a decline in the loyalty of the

customers. (Shahzad Khan, 2012).

Other Variables:

The other variables include the call rates / packages, call quality, SMS rates/ packages,

SMS quality, GPRS Rates/packages and GPRS quality. All these factors play an

important role in the building up of the loyalty among the customers of the company. All

these variables play essential role in impacting the overall quality and performance of

the cellular service providers. These variables also have some contribution in the

building up of communicative relationship between the company of supplier that

provides the cellular service and the customers. They are influencing the satisfaction of

the customers that in turn have side effects on the loyalty of the customers. (Shahzad

Khan, 2012).

Theoretical Framework of the Study



Based on the literature review, the study develops the conceptual framework given

above to analyze the determinants of customer loyalty, its causes and influences in the

mobile telecom industry. Customer's loyalty is the dependent variable of this article.

This means that the primary or the main focus of the paper is on this variable, while

customer satisfaction, service quality, price, corporate/ brand image, promotion,

customer care/service, network coverage, signal strength, sales promotion, customers

trust, switching barriers, call quality/ call rates, SMS quality/ GPRS rates, GPRS

quality/ SMS rates and value added services are the independent variables. When the

customers are happy they feel very comfortable with such company or service provider

and so in response they also provide their favorable and positive response to that

company. This means that the customer's loyalty doesn't change or vary itself but if

variation comes in any of the independent variables it will cause the dependant variable

customer's loyalty to change.

HYPOTHESIS OF THE STUDY

A description of the hypothesis that independent variables are in significant relationship

with the dependant variable monitored by the study are discussed as follows:

?Customer satisfaction has positive association with customer's loyalty.

?Customer trust has positive association with customer loyalty.

?Corporate/ brand image has positive association with customer loyalty.

?Switching Barriers has positive association with customer loyalty.

?Service Quality has positive association with customer loyalty.

?Price has positive association with customer loyalty.

?Customer Care/Service has positive association with customer loyalty.

?Promotion has positive association with customer loyalty.

?Sales promotion has positive association with customer loyalty.

?Value Added Services has positive association with customer loyalty.

?Network Coverage has positive association with customer loyalty.

?Signal Strength has positive association with customer loyalty.

?Call Packages has positive association with customer loyalty.

?Call Quality/ Call Clarity have association with customer loyalty.

?SMS Packages has positive association with customer loyalty.

?SMS Quality has positive association with customer loyalty.

?GPRS Packages has positive association with customer loyalty.

?GPRS Quality has positive association with customer loyalty.

Murtaza Khurshid


Reliability of scale:

The table given below shows the reliability value of all variables of the study. The

Cronbach's alpha values of all the variables are greater than 0.70, that is the minimum

value at which the data becomes reliable. This shows that all the responses are highly

reliable for the study. It means that the respondents have answered the questions

correctly as required by the study. Hence it proves that the data.

Table 1. Reliability scale of the study.

METHODOLOGY

This research paper is conducted to determine the factors or variables that are causing

the customers to become loyal or disloyal toward their companies. For the purpose of

this research article following research methodology was used:

Population:

All the university students of Peshawar, Khyber Pakhtunkhwa, Pakistan are the target

population of this research study. As the whole Peshawar district is very large so it

requires a lot of resources and time to collect the large data, therefore, survey technique

is applied for data collection from the cellular users' by using questionnaires on the basis

of non probability convenient sampling method.

Sample:

The proposed sample size of the study is composed of 160 students chosen from the

population of students of universities of Peshawar district on the basis of non probability

(convenient) sampling method. For this purpose 160 questionnaires were distributed

out of that 145 were received.

Demographic characteristics:

for the analysis of demographic feactures of sample students, The SPSS software

Variable Factors S.No. Cronbach’s Alpha



version 20.0 is used for carrying out this analysis portion of the

of this analysis different results are drawn out. The table given below shows the results

drawn by doing the frequency distribution of the data collected through questionnaires

from the respondents i.e. the demographic factors of the study.

Table 2. Demographic characteristics

The above table results in the following descriptions.

Out of 145 respondents, 77.9% are male and 22.1% are female in the target area.

29.7% respondents are in the age range of 18-21 years of age, 34.5% in the range of

22-25, 33.1% in 26-29 years of age, 1.4% in 30-33 years of age, and 1.4% in the range of

33 or above years. Mobilink users are 10.3%, Telenor users are 33.8%, Ufone users are

35.2%, Warid users are 6.2% and14.5% users uses Zong.

26.2% respondents are using their gsm telecom operator for less than or equal to 3

years, 49% are using for 4 to 7 years, 9.7% are using for 8-11years while the remaining

15.2% of the respondents are using for 12-15 years.

The outcomes of the study also reveal that 40.7% of the respondents are utilizing the

services of single gsm operator, 16.6% using two gsm operators, 22.1% are using three

gsm operators, and 4.8% are using four gsm operators while the remaining 15.9% are

using 5 available gsm operators.


The SPSS software version 20.0 is used for analysis and then on the basis of this

analysis, different results are drawn out. The statistical tools used in this study include

descriptive statistics and regression analysis. Descriptive statistics is used to describe

study. Then on the basis

Age(years)

Gender

CellularNetwork you use

Number of years

Number of otheroperators

Measures Items Frequencies Percentage

Murtaza Khurshid


the

cause and effect.

Table 3. Model Summary

The adjusted R square value in the outcomes of the data clearly shows that Customer

loyalty is impacted 76.3% by the all independent variables. As R square value 0.788 is

near to “1” that is standard value for R square so it illustrates that these independent,

which variables are causing impact on the customer loyalty of the telecom service

operator users.

ANOVA Analysis and Interpretations:

The result of the ANOVA table demonstrates the significance of the model and is also

statistical test of the hypotheses about the population mean. If the p value is less than

0.05, it is significant. In the table given above “p” value is 0.00 that is less that 0.05 so the

model of this study is significant statistically. This means that all the independent

variables of the model are significantly in relationship with the dependant variable of

the article that is Customer loyalty.

Table 4. ANOVA

Table 5. Results of Regression

independent and dependent variables and regression analysis is used to explain the

Coefficeintsa

Model UnstandardizedCoefficients

StandardizedCoefficients

t Sig.

B Std. Error Beta



The above table shows the Regression Co efficients which identify the cause and effect

relationship of all the independent variables on the dependant variables of the study. The

individual impact of each variable is shown that how much each and every independent

variable is causing impact on the dependant variable. The unstanderdized coefficient

value in the given table shows that the customer loyalty is significantly influenced by all

the independent variables of the study. While the value of standardized coefficient

demonstrates that the Customer satisfaction is the first factor that has the most

significant contribution in creating positive customer's loyalty with having the highest

standardized coefficient value of 0.512. Sale promotion is the second most important

factor that has the second highest contribution in creating positive customer loyalty and

the highest standardized coefficient value of 0.283. The third most active and important

factor is the Value added services that has the third highest standardized co-efficient

value of 0.207. The fourth most active factor that has the fourth highest standardized co-

efficient value of 0.195. From the table it is clear that the significance value of all the

variables is 0.00 which is less than 0.05, therefore the hypotheses of the study, that there

is a significant relationship among the independent variables and the customer loyalty

the dependant variable are accepted.

CONCLUSION

The main objective or the purpose of this article is to appropriately explore the

determinants of customer loyalty in the Telecom industry of users in Peshawar, Pakistan

and to analyze its causes and influences of the telecom service providers. From the

results of the study it is found that all the independent variables of the study that are

customer satisfaction, service quality, price, corporate/ brand image, promotion,

customer care service, network coverage, signal strength, sales promotion, customers

trust, switching barriers, call quality/ call rates, SMS quality, GPRS rates, GPRS quality,

SMS rates and value added services are having direct and significant relationship with

the loyalty of the customers in the telecom industry of Peshawar, Pakistan. It is extracted

from the study that mostly the users of the telecom are males genders which is 77.9% of

the overall population of the study while the remaining 22.1% are the females. It is

concluded that there is low correlation among the sale promotion and customer loyalty

of telecom users in Peshawar, Pakistan. The result illustrates that Customer satisfaction

is the first, sales promotion is the second and value added services are the third most

important factors that are highly valued in creating positive customer loyalty of the

telecom mobile service users in district Peshawar, Pakistan.

RECOMMENDATIONS

From the above conclusion of the study, the following are proposed recommendations.

It is highly recommended for the telecom firms to effectively and efficiently build, grow

and maintain the loyalty of their customers for long period of time. The companies

should highly emphasize on the customers' satisfaction so as to create positive customer

Murtaza Khurshid


loyalty and the company should not only make hold of their present customers but also

more and more new customers are attracted toward the company. It is also

recommended for the firms to formulate and implement their marketing and

promotional tasks, activities and programs in such a strategic way that they improve and

encourage the customers' loyalty. The network coverage should be extended along with

the improved signal, so that the customers do not have any obstacle in communicating

while using their service. The price must not be increased in any case as it will cause

negative impact on the loyalty. The quality of call, sms and Gprs services should be

improved by the implementation of the modern technology.

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Australian Journal of Business and Management Research.

Dr. Boohene Rosemond, A. G. ( January 2011). Analysis of the Antecedents of

Customer Loyalty of Telecommunication Industry in Ghana: The Case of

Vodafone (Ghana). International Business Research .

Dr. Kheiry Bahram, A. M. (2012). The Effect of Satisfaction, Trust and Switching

Barriers Service Provider on Customer Loyalty (Mobile Phone Users of Iran

Cell Campany In Iran). Australian Journal of Basic and Applied Sciences .



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Affect the Product Brand Switching? A Lesson from the Biggest Southeast

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Loyalty-A Case of the Mobile . Asian Journal of Business Management,

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dictionary.thefreedictionary.com/trust

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in different levels of relationships.

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Special reference to Bharath Sanchar Nigam limited,India.

Joyce Koi-Akrofi, G. Y.-A. (2013). Relationship Marketing Tactics and Customer

Loyalty-A Case of the Mobile Telecommunication Industry in Ghana. Asian

Journal of Business Management , 77-92.

Jun-Der, L. (2004). Factors affectingcustomer loyalty to application service providers

in different levels of relationships.

Kim Moon-Koo, J. D.-H. (2004). The effects of customer satisfaction and switching

barrier on customer loyalty in Korean mobile telecommunication services.

Kim Won-Yong, S. D.-H. (2008). Forecasting customer switching intention in mobile

service: An exploratory study of predictive factors in mobile number

portability.

Majeed, A. (JUNE, 2011). Service quality and customer Loyalty: The case of the Mobile

Telecommunication industry in Ghana.

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http://www.ehow.com/about_5403912_definition-sales-promotions.html

Mohd Rozhan Nik Ismail, R. N. (2010). An Investigation of the determinants of

customers' loyalty of the Maxis Communications Berhad.

Murtaza Khurshid


Morello, R. (2012). The Effects of Advertising and Promotion. Retrieved Jan 2013,

from Smallbusiness.chron: http://smallbusiness.chron.com/effects-

advertising-promotion-59158.html

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loyalty, and profitability: an empirical study. International Journal of Service

Industry Management .

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Loyalty: A Conceptual Framework to Determine Outcomes. International

Conference on Economics, Business Innovation .

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Industry; A Study of Telecom industry Peshawar KPK Pakistan. Journal of

Basic and Applied .

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Customer Satisfaction-retention Link: Retail Internet Banking Service in

Hong Kong. Ibima business review .

Suraju Adepoju ADELEKE, D. A. (July 2012). The Determinants of Customer Loyalty

in Nigeria's GSM Market. International Journal of Business and Social

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of Switching Costs. 799–822.

Murtaza Khurshid: MBA (Marketing) from City University of Science and Information Technology, Peshawar. One research publication . Planning of Marketing is the area of interest. e-mail: [email protected]



The role of Philanthropic Activities For the Resources And

Operations For Maintaining Strategic Position of Hospital(A case of Peshawar KPK government sector hospital

of Khyber Teaching Hospitals)

Arshid Zia Sadiqui and Aamir Khan

ABSTRACT

The research study was conducted in government sector hospitals in the Peshawar

region. It was found that role of philanthropic activities are worthy for the development

of resources and operational conditions in these working hospitals. The position gets

further improved and ultimately it provides sustainable conditions to work with good

capacity. Correlation of philanthropic activities with resources development and

operational conditions was found significant and weak and resources development

variable was found with strategic position value of -0.217 that indicates that the

strategic position significant promotes the resources development from the

philanthropic activities. The role of operational conditions with strategic position was

found positive, significant but weak that is 0.273 which indicates that there are other

variables that are promoting the strategic position in these working hospitals. The

overall role of the philanthropic activities was found supportive for the operational

conditions and resources development. Therefore, it has been conclude that

philanthropic activities are taking place in the government sector hospitals for the sake

of developments and strengthening.

INTRODUCTION

Health related initiatives and institutions are always very important for caring, and

intellectual growth in all societies. The existence of well equipped hospital. The

physical research and advance oriented approaches provide a long lasting differentiable

strength in the communities. The provision and development of such types of

institutions are different for differrent levels of the communities for the development of

the societies and in enormous number. Hospitals provide long lasting services with care

and affectiveness are with good working setup and application elements to serve at its

best. The contributing from resources point of views and backups are provided by the

central and provincial govt, along with, technical and research oriented support.

Support in the form of financial and non financial shape are contributing at its best when

they are maintained and developed for the increasing needs of the communities. The

best developmental fit arises in the case where best match is recorded between academia

and industry. The match in this form does provides right application of the theory learnt

at the operational levels in the working hospitals. This maintains strategic equalization

between the knowledge that is transfered and the transferred knowledge that is applied

t o b e s t s e r v e t h e c o m m u n i t y w i t h r e a l c a r e . T h e



role of philanthropic activities are found very worthy in case of difficult and uncertain

financial position of the developing economies with continuously arising needs in

health sector especially in hospitals. The role philanthropic activities are found very

supportive and optimistic in needy condition. These types of activities are providing

hope in the hopeless conditions and help hospitals to grow with the changing

environment and carry the development with the available limited resources. Therefore

role of philanthropic activities in countries have a strong financial and non financial

impact on the growth and development of the undeveloped societies. Therefore the

research study is taken as one the important initiatives to examine the impact of the

philanthropic activities for the growth and successful operation of the universities in the

changing trends in one of highly effected province of Pakistan, KPK. Major government

sector hospitals are examined in the Peshawar, KPK region to understand the impact of

the philanthropic. Therefore the research activities study will provide us insight

information towards the philanthropic activities role for the development of the

communities.

Problem Statement

Disease free society contributes towards the development of the communities in the

form of societal development, personality development, skills development, abilities to

serve the organizations and abilities to confront the challenges of the development and

research innovation. The operations of the serving abilities of the working hospitals are

strongly mandatory for the welfare and care of the communities. The philanthropic

activities are found one of the societal and humanitarian initiative to respond to the

needy and financial suffering hospitals. The philanthropic activities are useful in

financially weak and uncertain conditions, but it requires a sound initiative to respond to

offers from financially strong and nonprofit oriented organizations. Therefore

disruption is found to critically understand the role of philanthropic activities for the

development of universities for the successful operations of the working hospitals.

Objectives of the research study:

?To examine the philanthropic activities in the government hospitals of

Peshawar

?To examine the influencing role of the philanthropic activities towards the

resources development

?To examine the role of philanthropic activities for the operational conditions in

the working government sector hospitals of the Peshawar region

Significance of the research study:

The research may prove to be significant due to its examining the financial support of

nonprofit organizations and financially prosperous organizations and their

The role of Philanthropic Activities...


contributions for the development and maintaining qualitative outcomes. It may also

prove significant to examine the critical information in the application of the sponsors

for the key operations that are planned to meet the needs of hospitals in the form of

developmental projects of learning. The research is finally found to be worthy to plan

for the attracting more philanthropic towards the development of strong bounds and

trust factor to promote the serving medical institutions for the uplift of the served and

serving communities.

LITERATURE REVIEW

The research study of Marx (1998) defined that corporate philanthropy as the process by

which contributions are targeted to meet both business objectives and recipient needs.

Other research studies explained that corporate charitable contributions are

significantly associated with future revenue, it is spent on the needy people in different

forms and different activities to provide a hope of life (Lev et al. 2008). Some

researchers documented for philanthropic activities its role known as highly supportive

for social and business spheres in low developed countries which are suffering from

poverty and inflationary periods. Unemployment is also found another major influential

factor in such kinds of economies whereas charities are found to be a highly influential

phenomenon for the support of such kinds of problems with ease (Baskin, 2008). The

research study of Crane et al, (1905) provided insight information in this regards as

multinational corporations are found to be highly influential financially backed and

strong organization. They do have to address the issue of loss of financial setup, control

of resources and a running condition whereas the philanthropy is found to contributive

and productive for the all organizational running from the point of view and social

support.

A descriptive research of Friedman in 1970 provided supporting information in favor of

philanthropic activities that they were found very important of societal development

and contribution of the organizational earning for the welfare of the society. Therefore

the philanthropic activities should carry in the societies for the development

stakeholders and serving societies (Godfrey, 2005).

Philanthropic activities are possess in moral and financial support for the serving

communities. In response their outcomes grow in the form of productive capacities and

quality enhancements. Therefore philanthropic activities should be practiced for the

development and growth of the people and communities (Bernstein, 2003; Bachetti &

Ehrlich, 2007).

The role of nonprofit and financially prosperous organizations for the welfare activities

and different kinds of support of the societies are recorded in philanthropic activities to

promote being the well of all people and all those who are associated with these types of

organization Hammack, 1999; Proietto, 1999). The Research study of (Dowie, 2001;

Clotfelter, 2007) examined the association of philanthropic activities for the support of

Arshid Zia Sadiqui et al.


the people and societal and public sector organizations. It has been proved that

developed economies which are stable from financial point of view when they support

the undeveloped countries public sector organizations as results their productive

capacities will be build (Hammack 1999). Research proved that in the twentieth

philanthropic activities contributed significantly to the development and improved

performance and reformation of the undeveloped organization in financially weak and

uncertain economies. The reason for the growth behind all these initiatives has found

support in hard times and provision of resources to promote their mutual well being with

full capacities to serve the communities (Clotfelter 2007).

Hypotheses:

H1: Resources development is associated with increasing quantitative outcomes

add value in philanthropic activities

H2: Operational conditions with operating activities add value to philanthropic

activities

H3: Resources development and operational condition are influencing the

successful strategy in the working hospitals of the Peshawar region

Research Methodology:

Philanthropic activities are good in the form of financial and moral support for the sake

of impressive and productive outcomes. The examination of the proposed research topic

is processed with the help of mixture of primary and secondary research data's along

with valid approaches to understand the application side of the stated phenomenon.

Research Approaches to data:

The research approaches to the data is segmented in primary which is difficult to get and

secondary data is approached with the help of websites, Peshawar university annual

reports, manuals, magazines and other reliable sources. All the data are examined on the

sheet Excel 2007 version and the Statistical Packages for Social Sciences version 16.

The research approaches to the data are important to understand the role of



philanthropic activities for the betterment of educational activities of the Peshawar

University.

Research Instruments for the measurability of primary data and secondary data:

The research instrument of this study are structured interviews with the academic staff

and administrative staff that are responsible for handling all the resources acquisition

for the better utilization of the university infrastructure and operational requirements.

The structure for this purpose is found logically acceptable to set with the right

personnel and understand the application role of the philanthropic activities in the

premises of the Peshawar University. But the primary data is not enough for the purpose,

therefore, we have also collected the secondary data available in different source issues

by University of Peshawar. The amalgamation of these two required data in excel will

help in the investigation of the influential role of philanthropic activities for the well

being of the devotion and betterment of Peshawar University to serve the community

with full devotion.

Projected research work breakdown structure of time:

The required time for the projected research study is four months where it has been

divided according to significance and steps required for the completion of on time

research activities. The role of this influencing phenomenon is found important to

process it for this research with valid outcomes. The WBS for time is planned in such a

manner to initially progress towards the approval of research topic along with

methodology, literature review, data collection approaches along with time tested or self

developed structure interview format, collection of data, application of the required

tests and interpretation of the results for required outcomes and final preparing the

finally report in research paper format.

Statistical tools for quantitative outcomes:

The stated research topic is examined on the basis of primary and secondary data where

the collected data is examined on the basis of available technical software and

application systems. SPSS version 16 and Excel 2007 are used to measure the effect of

variable for the final dependent variable

Results:

The empirical results are shown in the following figures and tables:



Figure 1. Province wise Distribution of the Philanthropic Organization in Pakistan

The Given figure 1. illustrates the role of philanthropic organization in health sector in

the all four provinces of Pakistan. The maximum contribution comes from Punjab

where 59 organizations are operating, then Sindh where posses 27 philanthropic

organizations. Then Capital Islamabad has 20 organizations in operating condition to

serve the community and support government. While KPK has 13 philanthropic

organization and Baluchistan posses 8 working humanitarian philanthropic nonprofit

organizations while Azad Jamu and Kashmir posses only 4 working philanthropic

organization.

Figure 2. Sector wise Allocation of Funds

The given figure 2. explains philanthropic organizations and their sector wise

investment for the development and improvement in operating conditions. Findings

revealed that poverty allowances have been mainly targeting for controlling poverty and

providing financial support to serving organizations. The amount of 2225 million

rupees have been used in poverty alleviation. The health sector has been targeted with

minimum amount of money that is 225 million with reason of limited financial support

and resources availability.



Figure 3. Sector wise philanthropic organization in percentage.

The Given figure explains the sector wise contribution of the philanthropic

organizations in percentage. It has been found that maximum number of contribution is

in education and health that is 24 percent. The maximum percentage contributions are

the indicators that on one side the communities are targeted to get education and

improve their social academic status while on the other side health related efforts are

also kept in consideration for the sake of controlling medical problems. While

environmental, natural resources, other organization are found with minimum

contribution by philanthropists.

Table 1. Correlation Matrix

Given table 1. represents that correlation between the dependent variables of

philanthropic and their association with strategic position in the government sector

hospital of the Peshawar activities. It was found that philanthropic activities are in



positively correlated with resources found weak and significant with value 0.329,

philanthropic with variable operations found above variable resource that is 0.407 and

significant. Directly with strategic position it has been found above moderate value that

is 0.607 and significant. Resource availability was found positive and good in

association with operation that is 0.699 which is almost near to 7.00 and significant.

While resource development from philanthropic activities and their impact on strategic

position for correlation is found negative with weak and significant value that -0.217.

The operating condition improves from philanthropic activities towards strategic

position that's why the associating value was found as 0.273 with significant value. The

statistical results support the stated hypothesis H1: Resources development is

associated with increasing quantitative outcomes add value in philanthropic activities,

H2: Operational condition with operating activities add value in philanthropic activities

and H3: Resources development and operational condition are influencing the strategic

successful in the working hospitals of the Peshawar region.


In table 2. R indicates the value of correlation for philanthropic and resource. The 32.9

percent value of R square has been proved with only 10.8 percent of the variation in

dependent variable. F-test value is found above the value of rule of thumb with

significant result. Therefore the model is proved to be acceptable for he stated

hypothesis and for the purpose of the study. F statistics shows the statistical significance

of the model. The value of F change is 15.675 (P value = 0.054) representing that the

model is statistically synthesis.

Table 3. Regression Analysis

The given table 3. indicates the regression analysis between philanthropic and resource,

From regression point of view it has been proved that one unit change in



philanthropic activities in government sector hospitals of the Peshawar region brings

positive 0.682 unit change in the resources for the activities in these hospitals. Therefore

the application of philanthropic activities is found worthy for the development of

resources to serve the community with good backup and possession of resources. The

value of t-test for these two variables was found significant. The given results proved for

the support of stated hypothesis H1: Resources development is associated with

increasing quantitative outcomes add value in philanthropic activities.

Table 4. Model Analysis

Table 4. Explains the value association between philanthropic activities and operation

with a positive value 0.407 and only 16.5 percent of variability was found from

philanthropic activities and operational condition while the value of F-test was found

strongly acceptable with significance, therefore the role model is found highly

significant is 32.959 (p = .003)


Table 5. indicates the impact of philanthropic activities and it has been found that one of

philanthropic activities brings positive 0.441 unit change in the operational condition

with significant t-test. Therefore the role of philanthropic activities for this concern

found acceptable and positive. The regression analysis also proved that empirical

association of mentioned hypothesis that H2: Operational conditions with operating

activities add value in philanthropic activities.



Table 6. Model Analysis

Table 6. indicates that 40.00 percent of variability is found from resources development

and operation condition towards strategic position, it means that strategic position of the

organization found to be developed in case of appropriate philanthropic activities are

initiated to promote the resources and operation for affective strategic position. While

the value of F-test found significant and above the rule of thumb. Therefore the model is

found acceptable in this condition. It has been proved that empirical results are

supporting the stated hypothesis H3: Resources development and operational condition

are influencing the strategic successful in the working hospitals of the Peshawar region.


Table 7. illustrates multiple regression analysis that one unit of resource acquisition

from philanthropic activities change brings positive 1.362 unit change in strategic

position while one unit in operational condition brings unit 1.521 comparatively higher.

Both the impacting values are representing with significant t-test values. Therefore the

regression analysis values re found in support of the given hypothesis. On the basis of

regression results it is providing empirical acceptance for H3: Resources development

and operational condition are influencing the strategic successful in the working

hospitals of the Peshawar region.



Discussion, conclusion and futures prospects:

The research study proved the role of philanthropic activities in the government

sectorHospitals are playing positive and influencing role for the development and

strengthening the hospitals with good backup and support to promote their operating

and resources conditions. Resources development and operational conditions

improvement both are promotable on sound and need basis philanthropic activities.

Therefore where ever these types of initiatives are taking place in the health sector the

productive capacities will improve. But the correlation values support, accordingly, the

strategic position in the stated hospitals due to resources development and operational

condition improved by philanthropic condition. The reason is that philanthropic

activities are itself not enough to promote the strategic position while there are other

initiatives and applications to promote the strategic position for the uplift of the working

condition of the stated hospitals. The role of philanthropic activities are overall found

supporting and worthy therefore these types of activities need to be brought into

application for mutual development and serving the communities with good hopes and

prosperous condition. The research study is found compatible with research findings of

Marx, 1998; Lev et al. 2008; Baskin, 2008; Bernstein, 2003; Bachetti & Ehrlich,

2007and Clotfelter 2007).

CONCLUSION

The research study proved the influencing role of philanthropic activities for the

development of resources and operational conditions. These influencing roles are

proved to be effective for the working hospitals in Peshawar region. So philanthropic

activities are needed to promote the development of working activities and growing

capacities.

Future prospects of the research study:

The Research study has found valuable and support for the operational conditions and

resource oriented conditions. There are certain possibilities that further research could

provide certain more in depth information. The possible relationship and association

with this study are found possible in form of following variables.

?Logistics support for development of productive capacity

?Philanthropic activities and development of financial strengths

?Philanthropic activities and research and development oriented initiatives

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as a relationship richer in possibilities than results. In R. Bacchetti, & T.

Ehrlich (Eds.), Reconnecting education and foundations (pp. 251-281). San

Francisco: Jossey-Bass.



Baskin, J. (2006). Value, Values and Sustainability: Corporate Responsibility in

Emerging Market Companies. SSRN eLibrary.

Bernstein, A. (2003). Is philanthropy “abandoning” higher education?. Presidency,

6(3), 34-37.

Clotfelter, C. T. (2007). Patron or bully? The role of foundations in higher education. In

R. Bacchetti, & T. Ehrlich (Eds.), Reconnecting education and foundations

(pp. 213-248). San Francisco, CA: Jossey-Bass.

Crane, A., Matten, D., & Spence, L. J. (1905). Corporate Social Responsibility: In

Global Context. Corporate social responsibility: readings and cases in global

context. Routledge, 3-20,

Dowie, M. (2001). American foundations: An investigative history. Cambridge: The

MIT Press.

Godfrey, P. C. (2005). The relationship between corporate philanthropy and shareholder

wealth: A risk management perspective. The Academy of Management

Review, 777-798.

Proietto, R. (1999). The Ford Foundation and women's studies in American higher

education: Seeds of change? In E. C. Lagemann (Ed.), Philanthropic

foundations (pp. 271-284). Bloomington: Indiana University Press.

Arshid Zia Sadiqui: Lecturer in finance, Jinnah Islamia College of Commerce, Peshawar. MS-Management (Finance) from Gandhara University, Peshawar. M.Com. and M.A Economics from University of Peshawar. Ex-MCS from City University of Science and Information Technology, Peshawar. Published more than 8 research papers. Areas of interest finance and I.T. e-mail: [email protected], [email protected]

Aamir Khan: Student of Master in Economics, Institute of Development Studies, KPK, Agriculture University, Peshawar. Two years teaching experience at Higher Secondary School level. Published one research paper. Area of interest is applied economics.e-mail: [email protected]



Selecting an Appropriate Source of Media as an Effective Source

of Promotion and Communication From ATL and BTL Modes of

Advertising(A Study of FMCGs in Peshawar)

Haider Iqbal and Zilakat Khan Malik

ABSTRACT

This study investigates the impact of FMCGs ATL and BTL advertising methods on the

consumer response in the city of Peshawar Pakistan. This work apply both analytical

and descriptive approaches to find suitable source of advertising and communication

from ATL and BTL methods. The independent variables of ATL advertising were

Television (TV), Radio, Internet and Print Media, where as the independent variables of

BTL advertising were Billboards, Transit, Flyers, Banners, Wall chalking, Point of sale

display, Word Of mouth and the dependent variable was customer response. There were

12 hypotheses of the study. Linear regression was applied in research article to find out

the impact of independent variables on the dependent variable. Primary data was

collected through questionnaires with the sample size of 200, of which 143 were

completely filled and responded. The finding of the study shows that all of the

independent variables had significant impact on the dependent variable that is

customer response. The result of the study shows that billboard, wall chalking and

transit advertising have significantly high impact on the generation of positive

customer response among which billboard is the most effective and efficient. From the

results, it was concluded that in Peshawar companies need to advertise their FMCG

products on billboard to get effective and efficient results with minimum cost and

maximum output.

INTRODUCTION

Communication plays an important role in the advertising of a product or service.

Marketers use different modes of promotion and advertising in order to satisfy customer

respective demands. This research topic try to find out, effective source of media as an

effective source of communication: A study of Fast Moving Consumer Goods (FMCG).

There are two basic sources of communication i.e. ATL and BTL. ATL stands for above

the line, which means sources of communication or promotion including mass media

i.e. Television (TV), Radio, Internet and print media. Advertising on ATL is expensive

but it is having mass affect and covers broader area. It uses expensive modes of

communication with the target customers. BTL stands for below the line, which means

sources of communication or promotion that cover small portion of the target market. It

include Billboards, Transit, Flyers, Banners, Wall chalking, Point of sale display, Word

of mouth etc. BTL is not as much expensive as the ATL but it is also efficient aneffective

source of communication between company, target customers and consumers.



ATL is a direct way of advertising in which target gets direct and maximum amount of

response as it is done for mass target group which contain large number of target

customers where as BTL is used to communicate with a smaller group of target

audience. Through customer’s response the research study was to find out appropriate

source of advertisement between ATL and BTL.

LITERATURE REVIEW

Advertising is a marketing term and it is one of the form of communication through

different mediums. It is a paid form of communication that is sponsored by known

sponsor and is done for a larger audience

TV

TV advertising is a part of a television program that has been paid by a company of the

product. TV ads compel customers to buy product because it show the use and

demonstration of a product. The TV ad should be revised in order to get better result .

The meaning of the commercial is not just present in the commercial and also not in the

viewer but it is present in both of them and with their intention. TV commercials and

advertising for product along with the awareness make the customers to recognize the

product and to recall it .

Radio

Advertising on radio can be of very low avoidance and mostly customers do not switch

to whole advertising and listen commercial and get informed and in the end help

advertiser that the target message had been reached to the target customers . It has the

ability to convey messages that are emotional and make them associated with brand

which help in recalling brand and product . It may have sudden change in the behavior of

customers as it has the ability to divert customer attention .

Internet

Internet is used as a source of advertising and use online sources for promotion of

products to attract target audience . Advertising of FMCG goods through internet are

done in a very creative way to make it more attractive for relevant customers and to

convey message effectively . For better ad on internet it is necessary to do full planning

and make advertising as much creative as possible to attract relevant customers . It gives

ideas, advices and information about product and makes customers to have full insight

of the product . The cost of ad is also determined by the position, size and time i.e, what

is the size of ad and where it is located on page and for how much time it will appear on

the website .

Print Media

Magazines and newspaper provide much more information about products and is

Selecting an Appropriate Source of Media...


helpful for advertiser to persuade customers. The regional and local newspapers are

very helpful for the advertisers to target any specific group of customers according to

their needs and wants (Nadine Lindstadt, 2011). As the advertising done in magazines

are very creative so it is very helpful in attracting customer's attention . There are many

different factors that are present to determine cost of newspaper advertising depending

upon different situations.

Billboards

Advertising on billboards is outdoor advertising in which advertisers target customers

such as passengers, drivers and people who are walking . Advertising on billboard give

the impression to the potential customers that it is made for them . Billboard is a kind of

BTL advertising that is dominant in it. Due to technology, billboards are advanced and

some of the billboards are huge screens along with the sound to efficiently grab attention

of customers . In billboard advertising the message from the company should be written

and conveyed in such a way so that it is easily understandable and should be easy for

customers to recall (James Colborn, 2009) .

Transit Advertising

Advertising is done either inside the vehicle or outside the public transport transit.

Transit advertising help customers to imagine the product as the message of transit

advertising is direct and is kept very simple which makes it better and easily

understandable by the customers . Transit advertising is very helpful in attracting

attentions of students. Research shows the rates of transit advertising may differ from

exterior to the interior.

Flyers Advertising

Flyers advertising is a type of BTL advertising which is done through a paper known as

advertisement through paper or paper advertising . To make it more efficiently

workable, the marketers add some discounts offers along with advertising . The price is

also determined by the quality of the flyer that what quality paper advertiser wants, the

better the quality the higher the price .

Banners Advertising

Advertising through banner is a kind of BTL advertising in which advertisement of a

company about product is shown on a banner . The banner advertising should be

made in such a way that it shows a clear idea and meaning about the company and its

products (Clark, 2006) . If the cloth is expensive and the message and product drawn on

it is glossy and colorful then the price is high as compared to simple one. It is helpful to

start a campaign on advertising .

Haider Iqbal et al.


Wall Chalking Advertising

Wall chalking is a kind of BTL advertising in which chalk is use for making an

advertisement . It is a deal between company and authority that when the authority

wants the company to remove their advertising, the company will remove it with their

own expense .

Point of Sales Display Advertising

Point of sale display can also be done on seasonal basis or it can also be done on holidays

which may be a point of attention toward the product . Advertising through point of sales

display is basically adopted for the fast moving consumer goods FMCGs .

Word of mouth

Word of mouth advertising is a type of BTL advertising in which advertising is done

willingly and voluntarily by people and customers that are satisfied from the product

and company. If a person is satisfied from the products and services offered by a

company, the customers use word of mouth for the promotion of company and product

and they do it willingly. For the success of any business, word of mouth advertising is

very important because one customer can make many more customers without any

effort . Once image of a company or product is build up then it is very easy to get new and

potential customers through word of mouth advertising .

THEORETICAL FRAMEWORK

Theoretical framework of ATL/BTL advertisement as a source of communication and

promotion.



The following theoretical frame work is established based upon the literature review,

which clearly analyze the independent variables and the dependent variable. The

independent variables are television, radio, internet, print media, billboards, transit,

flyers, banners, wall chalking, word of mouth, and point of sales display. The dependent

variable is the customer response. The main purpose of the study is to find out that which

source of advertising is an appropriate source of advertising for the fast consuming

goods in the ATL and BTL.

Hypotheses of the Study

Hypotheses of this research paper are as follows,

l There is a significant impact of Television advertisement on consumer

response.

l There is a significant impact of Radio advertisement on consumer response.

l There is a significant impact of Internet advertisement on consumer response.

l There is a significant impact of Print media advertisement on consumer

response.

l There is a significant impact of Billboard advertisement on consumer

response.

l There is a significant impact of transit advertisement on consumer response.

l There is a significant impact of Banner advertisement on consumer response.

l There is a significant impact of Flyer advertisement on consumer response.

l There is a significant impact of Wall chalking advertisement on consumer

response.

l There is a significant impact of point of sale display advertisement on

consumer response.

l There is a significant impact of word of mouth advertising on consumer

response.

l There is a significant impact of ATL advertising on the customer response.

l There is a significant impact of BTL advertising on customer response.

Reliability of scale

The table below shows the data collected from respondents and its reliability. The

reliability test Cronbach’s Alpha value is 0.7 which sugests that data is reliable and the

data collected is valid and is able to draw a valid result.

Haider Iqbal et al.


METHODOLOGY

This research article shows that to select appropriate source of media as effective source

of communication for FMCG in city of Peshawar.

Population

Some major universities of Khyber Pakhtunkhwa Peshawar were taken as the

population . Population is taken from Peshawar because result of the study is to find out

effective source of communication and promotion in Peshawar. The questionnaire

survey was conducted on users of FMCG and the target of the study was mostly the

students of universities because they have excess to both the modes of advertising of

ATL and BTL.

Sample

The sample size was composed of 200 respondents. A sample size of 200 students was

selected from the whole population and the data was collected through questionnaires.

Questionnaire of a total number of 200 was distributed among the customers of FMCG,

in which 143 were completely filled and returned and in the remaining 57, 57 were not

properly filled.

Demographic characteristics

Below is the table that shows the demographic characteristics of total sample size of the

research thesis. The demographic analysis shows that the total number of respondents

were 143.



The descriptive table below shows that among all the 143 respondents 106 of the

respondents were males and 37 respondents were female.

Table 1. Descriptive information


SPSS 20 was being used for the analysis of data. Linear regression was used to find out

the impact of independent variables on the dependent variable. The table shows that the

dependent variable (consumer response) is influenced 84 percent by the independent

variables. As the value or R Square is near and very close to the value of ONE, so it

means that the independent variables have high impact on the consumer response in

advertising industry.


Interpretation of Model

The table 3. below explains the significance of model. The model is significant if the p

value of is less than 0.05 so the model is said to be significant. In the table given the p

value is less than 0.05 that is 0.00 which mean the model is statistically significant. So

from the given table it is clear that the independent variables are significantly related to

the dependent variable and have significant impact on consumer response.

Table 3. ANOVA of the Model

Haider Iqbal et al.


Table 4. Regression Co-efficients of the Model

The above table of regression co-efficients clearly shows that there is significant impact

of ATL and BTL advertising on the consumer response and as the value is positive so it

means that ATL and BTL advertising has positive impact on consumer response and the

consumer response is positive. In the above table the standardized coefficient shows that

Billboard is the most significant and most important factor in the advertising industry

that cause great and positive consumer response in Peshawar Pakistan with (b=0.254)

then wall chalking (b=0.162) then transit with (b=0.159) then internet with (b=0.127)

then word of mouth with (b=0.120).

The variables with weak impact are Point of sale display with (b=0.103) radio with

(b=0.085) flyer with (b=0.067) television with (b=0.039) banner with (b=0.026) and

print media with (b=0.018).

As the above table shows that values of all the factors are positive the values of sub

factors are significant at value = 0.05, so from the given result it is concluded that all of

the above listed hypotheses are accepted.

CONCLUSION

The main purpose of this article was to find out appropriate source of media for FMCG

in Peshawar. The result shows that the large proportion of advertising for FMCGS has

positive impact on male between the age group of 22-25 years. This research concludes

that there is significant relationship of all the independent variable with each other

which means all of them are important as source of advertising. The basic objective of

the research paper is to find out the impact of all the independent variable on



the dependent variable, this research conclude that all of the independent variable have

significant impact on the dependent variable that is customer response. The most

important independent variable that has positive impact on the dependent variable as

compared to other variables is Billboard.

Finally, it is concluded that the most important independent variable that creates more

positive customer response in Peshawar for the FMCGs is billboard as compared to all

other variables of ATL and BTL advertising.

RECOMMENDATIONS

On the basis of conclusion, it is recommended to the companies of FMCGs that they

need to use billboard advertising in Peshawar city for advertising their products because

it is the most effective source of communication and promotion with customer that

creates positive response to the advertising. As the impact of billboard advertising on

creating positive customer response is high so it is highly recommended to companies of

FMCGs to use it as a source of communication and promotion with customers.

It is also recommended that the company need to make advertisement that attract both

the male and females customers.

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activities.html

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development/coca-colas-creative-genius-what-can-we-learn/

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World-War-Z-movie-set-expensive-flop-time.html

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Haider Iqbal: Visiting faculty in various private universities. MBA (Marketing) from City University of Science and Information Technology. One research paper is published . Area of interest is Advertising and Marketing.e-mail: [email protected]

Zilakat Khan Malik: Associate Professor of Economics, Department of Economics, University of Peshawar. Ph.D in Economics from University of Peshawar. During 23 years teaching experience, taught various subjects of Economics as Lecturer in Islamia College University, Peshawar, as Assistant Professor in Peshawar University and as Professor of Economics in Kardan University, Kabul, Afghanistan. More than 19 Research Papers. Area of interest: Social Sciences, International Economics, and Development Economics. e-mail: [email protected]



Human Resource Management of Cellular Company in Pakistan,

Finding the Balance in Standardization of Human Resource

Policies and Practices

Muhammad Islam and Raza Ullah

ABSTRACT

This research examines standardized human resource management practices in a major

cellular company and the gap between the best HR practices and the HR practices of the

said company in Pakistan. The study reveals that the cellular company has good HR

system in place. Majority of employees responded that the company has properly

managed, evaluated (71%); rewarded and appraised performance management (63%);

majority of employees have been properly trained, with appropriate formal training

need assessment (79%) and regular calendar wise schedule for training (52%). Fifty

percent of employees have the view that organization has merit based recruitment and

selection system along with internal and external recruitment. It is observed that more

than 52% employees are satisfied from the HR strategies and policies, and HR audit and

planning is made for the purpose of effective utilization of human resources. It is

concluded that the company in Pakistan has good HR system but there are certain gaps

which need to be filled for an effective and optimum utilization like better training

opportunities and an improved performance management system.

Key Words: HR practices, Selection, Recruitment, Training, HR System

INTRODUCTION

Nijhof, Jong, Beukhof, (1998) say that Human resource Management advocates such

practices and policies which enhance organizational effectiveness and optimum human

resource utilization. He identifies the following activities H u m a n R e s o u r c e

Planning

_ Selection and Recruitment Process

_ Orientation and Training

_ Employees' Performance Management

_ Compensation and Benefits for employees.

_ Job analysis

In support of them, Jackson (2004) states that Human Resource Management is very

necessary for an organization to achieve both its short and long term objectives. It plays

a role like blood in the success of an organization. Without human resource management

department an organization may not be very effective and efficient in term of achieving

its goals and objectives, while Foote, Seipel, Johnson and Duffy (2005) declare HRM as

more systematic and strategic process of managing the employees of an organization,

who alone or in group play a vital role in achieving an organization's objectives and



Human Resource Management of Cellular Company...

goals. Alatrista and Arrowsmith (2004) indicate that HRM has changed the concept of

personnel management. Human Resource means hiring individuals, enhancing their

skills through training, developing, polishing and rewarding their services in such a way

that fulfill the needs of organization as well as that of the employee.

Koh and Boo, (2004) also stresses significance of HRM in organization. According to

him those who practice HRM believe that Human Resource Management is more

innovative process of workforce management than classical view. Its tools and

procedures stress on the HR Managers to get internalize organizational goals to

employees hence empowering them to achieve those goals. Coyle-Shapiro, Jacqueline

A-M. and Morrow, P. C. (2005) states that appropriate Human Resource Management

practices reduce enterprise risks. HRM goals play a significant role in meeting and

accomplishing organization strategic goals by hiring and sustaining workforce and

managing them.

Qureshi, Ishaq, and Rahman, (2007) signifies HR practices in cellular Companies in

Pakistan. He says that HR practices play a key role in the cellular companies' success

due to organizations' frequent customers' interaction. Therefore, it is important for it to

follow best HR practices to provide best services to company's valuable customers.

Telecom is the fastest multi-billion dollar growing industry in Pakistan which is

becoming the promising employer in the country. Cellular companies are good in

service provision compare to its land line telecom company.

Research Questions:

This research addresses the following questions.

_ Does Cellular Company follow the standardized HRM practices or not?

_ Does Cellular Company give fair compensation and benefits to its employees?

_ Does Cellular Company evaluate the performances of employees?

_ Does it make job description and job specification?

_ Does it give training to its employees?

RESEARCH OBJECTIVES

The key objective of this research work is to provide an understanding to the readers that

how different HR activities are conducted in the cellular company Cellular Company.

The detailed objectives are as follow.

_ To study the HR practices in the Cellular Company

_ To identify gap between the best HR practices and the HR practices

followed by the Cellular Company.

_ To analyze the different practices in recruitment and selection procedure

_ To study the practices in training and development.

_ To know whether appropriate performance management is carried out in

Cellular Company.

_ To see whether job analysis is properly performed


Muhammad Islam et al.

LITERATURE REVIEW

Human Resource Management practices:

In the era of cut-throat competition among companies, Cellular companies are trying to

get competitive advantages and are moving to more innovative and unique sources in

the course especially in HRM practices (Iun, J., Huang, Xu 2007). HRM practices are

defined differently, however; Schuler and Jackson (1987) define HRM as a system

which is useful in attracting, developing, motivating, and retaining workforce to make

sure the efficient accomplishment and endurance of organization and its staff members.

in addition, it is also defined as a set of inside steady policies and practices planned and

employed to make sure that a firm's human capital adds to the accomplishment of its

business objectives (Delery & Doty, 1996). Minbaeva (2005) calls HRM as a set of

practices used by organization to utilize human resource in assisting the development

of competencies that are hard, particular, and useful for generating competitive

advantages and retaining them. In the light of above, HRM practices refer to particular

practices, policies, philosophies that are planned to draw, develop, inspire, and sustain

human resources, who make sure successful operations and continued existence of

organization. Storey (1995) supports HRM as a distinctive approach to employment

management which seeks to obtain competitive advantages.

Huselid (1995) says that people are one of the key factors which give flexibility and

adaptability to Organization. Rundle (1997) states that human resource is an important

weapon of organization which determines how an organization will respond to stressful

environment to achieve competitive advantages. Many scholars have noted that

personnel management is a harder task than technology or capital management (Guy

Paré, GReSI., Tremblay, & Lalonde 2000). Though those firms that have better human

resource management system would have shown superior results in the long run as

healthy utilization of HR is an arduous and time consuming task (Guest, 2002).

Effective HR management needs adequate HRM system.

A suitable HRM system assists companies to develop organizational behavior in those

areas for example employees' loyalty, flexibility and competency, which lead to

improve employees' performance (Koch and McGrath, 1996). So for a good HRM

system the organization must have effective human resource management practices.

HRM Practices: Best HR Practices:

HRM practices are expressed differently, for example, Singh (2004) has identified it as

'best practices', 'High performance practices', 'formal HRM practices', and

'sophisticated HR practices'. Huselid (1995) says that the most appropriate and common

expression is 'best HR practices'.

In another study, Redman and Mathews (1998) identify 'HRM bundle' of key practices

which maintain service organization quality strategies, these are as under:

“Careful recruitment and selection, for example, 'total quality recruitment', 'zero defects

recruitment', 'right first time recruitment'; Extensive remuneration systems, for


example, bonuses available for staff willing to be multi-skilled; Team working and

flexible job design, e.g. encouraging a sense of cohesiveness and designing empowered

jobs; Training and learning, for example, front line staff having enhanced interpersonal

and social skills; Employee involvement, for example, keeping employees informed of

key changes in the organization; Performance appraisals with links to contingent reward

systems, for example, gathering customer feedback to recognize the work by employees

over and above their expected duties, which in turn is likely to lead to a bonus for staff.”

Recruitment and selection:

Roos (2006) defines R&S as a process of identifying someone who will be employed by

the organization meeting the requirements of the empty position. On the other hand, the

only term selection means processes that are involved in choosing from applicants, that

applicant who is suitable for the position. Recruitment consists of two types such as

internal recruitment inside the firm and external recruitment outside the firm.

Compensation and benefits:

Alatrista, and Arrowsmith, (2004) define compensation and benefits as compensation

means wages, salaries, while benefits mean job extras that are given by the employer to

employees which includes health care packages, life insurance, paid off. High level of

compensation and good benefits attract employees to companies and empty positions.

Some compensation depends upon the employee performances while some portion is

obligatory under state law.

HR Planning:

Black and Mendenhall (2006) says that HR planning is the strategy that the HR

department uses while hiring. It shows that how many employees are needed, what

skills and knowledge, they must have. What areas they must specialize in, what kind of

trainings they will need. Without HR planning, companies would effort to meet

demands of their position with sufficient workforce, and knowledge would not be

spread across the organization.

Job analysis:

Michael (2003) defines Job analysis as a formal process of recognizing job content, and

the activities required to perform the work and know major job requirements. Job

analysis was conceptualized by the founders of industrial/ organizational psychology

in the early 20th century. Job analysis gives information to organization which helps to

decide which kind of employees are best fit for specific jobs. One of the main purposes

of conducting job analysis is preparing job description and job specification, which

helps to hire the right quality of employees for organization. The common purpose of

job analysis is to write down the requirements of a job and the work performed. Job and

task analysis are performed as a basis for later improvements.



HRM and Organization Behavior:

Organizations have to stimulate intelligent workers to understand organizational

competitive environment, in that context, one key aspect in employee inspiration and

preservation is the prospect workers desire to carry on to develop meaningful and

motivating jobs. Indeed, this prospect to go on to raise and enlarge all the way through

training and development which is stated to be one of the main and significant factors in

employee motivation. These thoughts stress what workers want in training and

development opportunity. They also communicative your prospect to make loyal,

developing workers who will help both in your business and themselves all the way

through your training and development prospects.

It is also important to avoid favoritism in selection and recruitment process. According

to Singh, K. (2004) Staffing is the procedure of recognizing plus drawing talented

applicants from organization or from outside of the organization to appraise them for

future recruitment. Once applicants are known, an organization becomes capable to

start the selection procedure. It includes collecting, determining, and evaluating

information about applicants' education for particular locations. Organizations employ

these courses to enlarge the possibility of employing individuals who hold the right

skills and capacity to be successful at their job.

Conceptual Frame work:

In the light of above present review the following conceptual frame work has been

developed. The overall conceptual frame work evolves by combining the given key HR

functions.

Figure 1. Conceptual Framework



RESEARCH METHODOLOGY

Data was collected for the research from primary sources. Primary data was collected

with the help of below-mentioned method.

Data collection procedure:

The primary data for this research work is collected through questionnaire. The

questionnaire was designed in an understandable and easily known language consist of

close-ended multiple choice questions. This questionnaire was distributed in the

cellular company at all level employees working in district Peshawar. The questionnaire

was designed with great care in order to avoid misunderstanding and biasness, make it

easy and interesting for the respondent to willingly fill it out. It was not possible for the

researcher to collect data from all individual employees of cellular company because of

having large population size of the target area, so the researcher collected data from 75

different level employees of cellular company working in different places in Peshawar.

Results:

After the data analysis, the researcher has evaluated the tables and graphs on the basis of

following key HR factors mentioned in questionnaire given below.

_ Performance management

_ Training and development

_ Recruitment and Selection

_ Compensation and Benefits

_ HR Planning

_ Job Analysis

The researcher has found the following findings regarding each key factor of HR based

upon the questions given in the questionnaire under each factor about the HR practices

of cellular company in Pakistan.

Performance management:

The data indicates that majority of employees are known with their periodic

performance evaluation. They also show that performance evaluation also affect their

salary decisions. Employees also can their evaluation as fair and 77.3% support it. In

conclusion they say that employees' performances are properly managed, evaluated,

rewarded and appraised to identify their strengths and weaknesses in the cellular

company in Pakistan. The employees also agree that there is punishment in place for

wrongdoers. Few employees were satisfied with performance appraisal although some

were not satisfied. Although, they agree with its relationship with employees'

motivation and job satisfaction. Employees also concur with that organization has

performance standard for employees to follow.



Training and Development:

The information gathered from employees regarding their training they consider the

present training as insufficient as only 22.7% employees consider it as adequate. While

training is otherwise provided in all ranks in the hierarchy i.e. 38% and 26% agree and

strongly agreed with it. Regarding to the question whether they are satisfied with their

present training methods, 50% consider it appropriate while 45% consider it as

insufficient. 79% of employees consider training as an important tool to manage

difficult task in better way. Besides, samples agree with inappropriate facilities for

temporary employees.

Recruitment and Selection:

Majority of employees were satisfied with company recruitment and selection system,

and considered it based on merit both for external and internal recruitment. Jobs are

properly advertised in newspaper and also on internet, position's objectives,

requirements are defined, different tools are used by the organization for recruitment

and selection.

Compensation and benefits:

There is half consensus on reward policy among employees i.e. 50% of employees

considered reward policy as appropriate whereas employees are fairly rewarded, and

are happy with their salary and wage rate. Organization has both monetary and non

monetary reward system, all employees are eligible for reward. Employees are

rewarded for increasing productivity, customer satisfaction and creativity. 57%

employees were satisfied with salary and wages. Majority of the employees were of the

view that reward system were properly communicated to the employees and it has an

effect on organizational performance.

HR planning:

After inspection of tables and graphs, it can be seen that more than 53% employees are

satisfied from HR strategies and policies. 76% employees agree that an appropriate HR

planning process is in place in the organization which is according to the skills,

knowledge, and education of existing employees. 62% consider the HR planning as a

factor in the equal distribution of workload among employees. While 88% employees

consider the HR audit and planning in the organization helps it to analyze effective

utilization of human resources.

Job Analysis:

The statistical analysis of the data depicts that 80% employees are agreed that

organization has suitable job description and specification for empty positions. 76%

employees say that they are aware of their duties and responsibilities, while 56%

employees consider their selves as empowered for performing their jobs and 45%



consider their rate and salary compatible to their job description.

CONCLUSION

It is concluded that the organization understudy has good HR system but there is still gap

in best HR practices and the HR practices practically followed by organization.

Majority of the employees were of the opinion that performances are properly managed,

evaluated, rewarded, appraised for the purpose of identifying the strengths and

weaknesses of employees. There are also evidences that employees consider that the

organization has merit based recruitment and selection system from both internal and

external recruitment. Jobs are properly advertised in newspapers and also on internet;

positions objectives, requirements are defined; different tools are used by the

organization for recruitment and selection. Besides it, employees state that organization

has proper reward policy; employees are fairly rewarded; employees are satisfied with

salary and wage rate. It also indicates that the organization has both monetary and

nonmonetary rewards system. All employees are eligible for reward and are rewarded

for increasing productivity, customer satisfaction and creativity. In addition, it is

observed that mostly employees are satisfied from HR strategies and policies, and HR

audit and planning is performed for effective utilization of human resources. The

researchers observed that somehow the organization understudy in Pakistan has good

HR system but still improvement is needed in order to make it more effective.

RECOMMENDATIONS

Cellular Company has good HR system but this research proposed some

recommendations to make the HR system as good that can be compared with the best

practices in the world.

_ HR department is not entirely empowered to take all decisions. However HR

department claims it, but in reality it is opposite to it; many HR decisions are

taken by other departments ignoring the role of HR department. It needs a clear

distribution of power and authority.

_ There is a need of perfect knowledge to staff about the awareness of policies.

Therefore, staff must be involved in policy making process.

_ There is also need of improvement in recruitment and selection process of the

company.

_ All business decisions are made by the executives. Recruitment and selection,

hiring of employees and firing of employees is in the control of senior

employees. This practice can become the reason of discord among workforce

and senior management for power.

_ The company follows zero-tolerance policy for corrective actions. It is good

but not in all cases. It must see its discipline polices but requiring some

flexibility as well.



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247


Muhammad Islam: MBA (1.5 year) and BBA (4 years) in Human Resource Management from City University of Science & Information Technology, Peshawar. Published one research paper. Area of interest is Standardization of HR practices. e-mail: [email protected]

Razaullah: Assistant Professor, Department of Management Sciences, Islamia College University, Peshawar. More than 3 research papers are published. Area of interest is Human Resource Management Policies. e-mail:

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