PragyaanPragyaan: Journal of Management

a bi-annual refereed Journal

Volume 10 : Issue 1. June 2012

ISSN : 0974-5505

Listed in Ulrich’s International Periodicals Directory, USA

Research Papers/Articles

A Comparative Study of Compulsive Buying Behavior between Working and Non-Working Women– Rimple Manchanda

Global Accounting Convergence and Adoption of IFRS by India–(The Key Differences In Financial Statements) A Study of Noida Toll Bridge Company Ltd– Dr. M. Jayasree

A Study of Job Satisfaction among Doctors Working in Government and Private Hospitals in the State of Andhra Pradesh– Dr. Ramesh Kumar Miryala and Shailaja Thangella

Brand Image Analysis: A Study on Cosmetics in Hyderabad– Suresh Kandulapati

Employees’ Perceptions on Empowerment and Engagement– Virender Kumar Arora

Effect of Leadership Styles on Job Stress and Turnover Intention of Indian Insurance Industry – Dr. Rajul Bhardwaj

Role of Commercial Banks in Agricultural Credit in India.– Dr. Rajesh C. Jampala, Dr. P. Adi Lakshmi and Srinivasa Rao Dokku

Copyright @ 2010 Institute of Management Studies, Dehradun.

All rights reserved.

No part of this publication may be reproduced or transmitted in any form or by any means, or stored in any retrieval system of any nature without prior permission. Application for permission for other use of copyright material including permission to reproduce extracts in other published works shall be made to publishers. Full acknowledgement of author, publishers and source must be given.

The Editorial Board invites original, unpublished contributions in the form of articles, case studies, research papers, book reviews.

The views expressed in the articles are those of the contributors and not necessarily of the Editorial Board or the Institute.

Although every care has been taken to avoid errors or omissions, this publication is being sold on the condition and understanding that information given in this journal is merely for reference and must not be taken as having authority of or binding in any way on the authors, editors, publishers and sellers who do not owe any responsibility for any damage or loss to any person, a purchaser of this publication or not, for the result of any action taken on the basis of this work. All disputes are subject to Dehradun jurisdiction only.

Members of Editorial Advisory Board: Professor Pulin B Nayak Professor Arun P. SinhaDelhi School of Economics Department of Industrial & Management EngineeringDelhi IIT, Kanpur

Professor T..J Kamlanabhan Professor Narendra K Sharma DMS IIT, Madras Head, Department of Industrial &

Management EngineeringProfessor P. K. Chaubey IIT, KanpurIndian Institute of Public AdministrationNew Delhi Dr. S.P. Kala

Professor (Retd.), HNB Garhwal University, SrinagarProfessor M. AkbarIIM, Lucknow Professor V. Nangia

Department of Management StudiesProfessor D.L. Sunder IIT, RoorkeeIIM, Indore

Professor D.P. GoyalProfessor Vipin Gupta Chairperson, Computer CentreRos Jaffe Chair Professor of Strategy, MDI, GurgaonSimmons School of Management,Simmons College, Boston, USA Professor Bhagwati Prasad Former Director, KIMS,

Dharwad

Pragyaan: Journal of Management

Volume 10, Issue 1, June 2012

Patron: Shri Amit AgarwalSecretaryIMS Society, Dehradun

Chief Editor: Dr. Pawan K AggarwalDirector, IMS Dehradun

Editor: Dr. Anand Swaroop PandeyProfessorIMS, Dehradun

Associate Editor: Mr. Omdeep GuptaAssistant ProfessorIMS, Dehradun

Panel of Referees

Professor V. NangiaProfessor. Rudra Prakash PradhanDepartment of Management StudiesVinod Gupta School of ManagementIIT, Roorkee.IIT, Kharagpur

Professor R.C. MishraProfessor Himanshu RaiDirector, IPSDR,IIM, LucknowKumaun University, Nainital.

Professor GeetikaProfessor Zillur RahmanSchool of Management StudiesDeptt. of Management StudiesMotilal Nehru National Institute of Technology,IIT, RoorkeeAllahabad

Professor Sheeba KapilProfessor Susmita MukhopadhyayIIFT, New DelhiVinod Gupta School of Management

IIT, KharagpurProfessor Ram SinghIIFT, New Delhi Professor R.K. Pandey

FMS, Banaras Hindu University,Professor V.P.S. AroraVaranasiCollege of Agri Business ManagementG B Pant University of Agriculture &Professor Sita MishraTechnology, PantnagarIMT, Ghaziabad

Copyright @ 2010 Institute of Management Studies, Dehradun.

All rights reserved.

No part of this publication may be reproduced or transmitted in any form or by any means, or stored in any retrieval system of any nature without prior permission. Application for permission for other use of copyright material including permission to reproduce extracts in other published works shall be made to publishers. Full acknowledgement of author, publishers and source must be given.

The Editorial Board invites original, unpublished contributions in the form of articles, case studies, research papers, book reviews.

The views expressed in the articles are those of the contributors and not necessarily of the Editorial Board or the Institute.

Although every care has been taken to avoid errors or omissions, this publication is being sold on the condition and understanding that information given in this journal is merely for reference and must not be taken as having authority of or binding in any way on the authors, editors, publishers and sellers who do not owe any responsibility for any damage or loss to any person, a purchaser of this publication or not, for the result of any action taken on the basis of this work. All disputes are subject to Dehradun jurisdiction only.

Members of Editorial Advisory Board: Professor Pulin B Nayak Professor Arun P. SinhaDelhi School of Economics Department of Industrial & Management EngineeringDelhi IIT, Kanpur

Professor T..J Kamlanabhan Professor Narendra K Sharma DMS IIT, Madras Head, Department of Industrial &

Management EngineeringProfessor P. K. Chaubey IIT, KanpurIndian Institute of Public AdministrationNew Delhi Dr. S.P. Kala

Professor (Retd.), HNB Garhwal University, SrinagarProfessor M. AkbarIIM, Lucknow Professor V. Nangia

Department of Management StudiesProfessor D.L. Sunder IIT, RoorkeeIIM, Indore

Professor D.P. GoyalProfessor Vipin Gupta Chairperson, Computer CentreRos Jaffe Chair Professor of Strategy, MDI, GurgaonSimmons School of Management,Simmons College, Boston, USA Professor Bhagwati Prasad Former Director, KIMS,

Dharwad

Pragyaan: Journal of Management

Volume 10, Issue 1, June 2012

Patron: Shri Amit AgarwalSecretaryIMS Society, Dehradun

Chief Editor: Dr. Pawan K AggarwalDirector, IMS Dehradun

Editor: Dr. Anand Swaroop PandeyProfessorIMS, Dehradun

Associate Editor: Mr. Omdeep GuptaAssistant ProfessorIMS, Dehradun

Panel of Referees

Professor V. NangiaProfessor. Rudra Prakash PradhanDepartment of Management StudiesVinod Gupta School of ManagementIIT, Roorkee.IIT, Kharagpur

Professor R.C. MishraProfessor Himanshu RaiDirector, IPSDR,IIM, LucknowKumaun University, Nainital.

Professor GeetikaProfessor Zillur RahmanSchool of Management StudiesDeptt. of Management StudiesMotilal Nehru National Institute of Technology,IIT, RoorkeeAllahabad

Professor Sheeba KapilProfessor Susmita MukhopadhyayIIFT, New DelhiVinod Gupta School of Management

IIT, KharagpurProfessor Ram SinghIIFT, New Delhi Professor R.K. Pandey

FMS, Banaras Hindu University,Professor V.P.S. AroraVaranasiCollege of Agri Business ManagementG B Pant University of Agriculture &Professor Sita MishraTechnology, PantnagarIMT, Ghaziabad

From the Chief Editor

We draw immense pleasure in presenting the June 2012 issue of Pragyaan: Journal of Management. It

continues to gain appreciation and provides a platform that stimulates and guides the intellectual quest of

management scholars. The research articles submitted for publication in our journal are reviewed by external

referees comprising eminent scholars. Our Journal has attained heights in the arena of Management under

the invulnerable patronage, with the support of valuable contributions and panel of referees.

The articles presented in this issue address a variety of contemporary national and international issues. The

focus areas include: Compulsive Buying Behavior, Global Accounting Convergence and IFRS, Job

Satisfaction among Doctors, Brand Image, Employees’ Perceptions on Empowerment and Engagement, Effect

of Leadership Styles on Job Stress and Turnover, Intention of Indian Insurance Industry and Commercial Banks

and Agricultural Credit in India.

We would like to express our gratitude to esteemed contributors for their scholarly contributions to the journal

Appreciation is due to the Editorial Advisory Board, the panel of Referees and the Management of the institute

for their constant guidance and support. Many faculty members from the Management Department of the

institute especially Dr. V.K. Jain, provided the necessary editorial support that resulted in enhanced reader

friendliness of various articles. We are extremely thankful to all of them. We are also thankful to those who

facilitated quality printing of this journal.

We would continue our endeavor to harness intellectual capital of scholars and practitioners of Management

and present the same to our valuable readers. We do our best to oversee a review and decision-making

process in which we invite experts to review each paper and encourage them to provide timely, thoughtful,

constructive and diplomatic critics. We work towards integrating reviewers feedback alongwith our own

insights into the final decision and craft fair and balanced action that acknowledges the strength of the

manuscript, addresses areas of improvement and clearly convey the editorial decision and its rationale.

We have tried our best to put together all the articles coherently. Suggestions from our readers for adding

further value to our journal are however, solicited.

Dr. Pawan K AggarwalDirectorIMS Dehradun

Pragyaan: Journal of Management

Volume 10 : Issue 1. June 2012

CONTENTSResearch Papers/Articles

A Comparative Study of Compulsive Buying Behavior between Working and Non-Working Women.................................................................................1-9Rimple Manchanda

Global Accounting Convergence and Adoption of IFRS by India – (The Key Differences In Financial Statements) A Study of Noida Toll Bridge Company Ltd ...................................................................................10-18Dr. M. Jayasree

A Study of Job Satisfaction among Doctors Working in Government and Private Hospitals in the State of Andhra Pradesh ...............................19-31Dr. Ramesh Kumar Miryala and Shailaja Thangella

Brand Image Analysis: A Study on Cosmetics in Hyderabad .........................................32-35Suresh Kandulapati

Employees’ Perceptions on Empowerment and Engagement ........................................36-46Virender Kumar Arora

Effect of Leadership Styles on Job Stress and Turnover Intention of Indian Insurance Industry ............................................................................................47-55Dr. Rajul Bhardwaj

Role of Commercial Banks in Agricultural Credit in India .............................................56-63

From the Chief Editor

We draw immense pleasure in presenting the June 2012 issue of Pragyaan: Journal of Management. It

continues to gain appreciation and provides a platform that stimulates and guides the intellectual quest of

management scholars. The research articles submitted for publication in our journal are reviewed by external

referees comprising eminent scholars. Our Journal has attained heights in the arena of Management under

the invulnerable patronage, with the support of valuable contributions and panel of referees.

The articles presented in this issue address a variety of contemporary national and international issues. The

focus areas include: Compulsive Buying Behavior, Global Accounting Convergence and IFRS, Job

Satisfaction among Doctors, Brand Image, Employees’ Perceptions on Empowerment and Engagement, Effect

of Leadership Styles on Job Stress and Turnover, Intention of Indian Insurance Industry and Commercial Banks

and Agricultural Credit in India.

We would like to express our gratitude to esteemed contributors for their scholarly contributions to the journal

Appreciation is due to the Editorial Advisory Board, the panel of Referees and the Management of the institute

for their constant guidance and support. Many faculty members from the Management Department of the

institute especially Dr. V.K. Jain, provided the necessary editorial support that resulted in enhanced reader

friendliness of various articles. We are extremely thankful to all of them. We are also thankful to those who

facilitated quality printing of this journal.

We would continue our endeavor to harness intellectual capital of scholars and practitioners of Management

and present the same to our valuable readers. We do our best to oversee a review and decision-making

process in which we invite experts to review each paper and encourage them to provide timely, thoughtful,

constructive and diplomatic critics. We work towards integrating reviewers feedback alongwith our own

insights into the final decision and craft fair and balanced action that acknowledges the strength of the

manuscript, addresses areas of improvement and clearly convey the editorial decision and its rationale.

We have tried our best to put together all the articles coherently. Suggestions from our readers for adding

further value to our journal are however, solicited.

Dr. Pawan K AggarwalDirectorIMS Dehradun

Pragyaan: Journal of Management

Volume 10 : Issue 1. June 2012

CONTENTSResearch Papers/Articles

A Comparative Study of Compulsive Buying Behavior between Working and Non-Working Women.................................................................................1-9Rimple Manchanda

Global Accounting Convergence and Adoption of IFRS by India – (The Key Differences In Financial Statements) A Study of Noida Toll Bridge Company Ltd ...................................................................................10-18Dr. M. Jayasree

A Study of Job Satisfaction among Doctors Working in Government and Private Hospitals in the State of Andhra Pradesh ...............................19-31Dr. Ramesh Kumar Miryala and Shailaja Thangella

Brand Image Analysis: A Study on Cosmetics in Hyderabad .........................................32-35Suresh Kandulapati

Employees’ Perceptions on Empowerment and Engagement ........................................36-46Virender Kumar Arora

Effect of Leadership Styles on Job Stress and Turnover Intention of Indian Insurance Industry ............................................................................................47-55Dr. Rajul Bhardwaj

Role of Commercial Banks in Agricultural Credit in India .............................................56-63

Guidelines for Contributors

1. Manuscripts for publication should be typed in double space with a margin of 1.5 inches on both sides

to facilitate editing, only on one side of the paper and sent in duplicate to the Editor along with a soft

copy in the format of 12 point text single font- Times Roman and package – preferably MS Word for

Editorial convenience. All articles should include an abstract of about 150 words, and a few key

words.

2. Each manuscript should be accompanied by a declaration of the author(s) that the paper has neither

been published nor submitted for publication elsewhere.

3. Articles which are published should not be reproduced or reprinted in any form either in full or in part

without the prior permission of the editor.

4. Wherever copyrighted material is used, the authors should be accurate in reproduction and obtain

permission from the copyright holders, if necessary.

5. Papers submitted or presented in a seminar must be clearly indicated at the bottom of the first page.

6. Notes and references should be consecutively numbered and presented at the end of the article on

separate sheets of paper, and not at the foot of each page.

7. The articles can fall into any one of the following types: research based articles on management or IT

(with executive summaries), case studies, book reviews, letters to the editors, or interviews with

academicians/gurus/CEOs.

8. Footnotes, typed in single-space, should be numbered serially and placed at the end of the text.

Reference to literature cited should be carried within the text in brackets. The references, to be placed

after footnotes, should be listed alphabetically by author and chronologically for each author. It

should be kept as brief as possible.

9. Contributors are advised to be brief in introducing the subject and devote most of the paper to the

principal theme. The Journal prefers papers based on original data and fresh theoretical insights.

References to previous works should be made economically.

10. Present each figure and table near the relevant text. All tables must be consecutively numbered using

Arabic numerals with appropriate titles.

11. Write numbers in figures (rather than words) for exact measurement and series of quantities, including

percentages. Use thousands and millions rather than lakhs and crores.

12. Book review must contain the name of the author and the book reviewed place of publication and

publisher, date of publication, number of pages and price.

Call for Papers for Pragyaan: Journal of Management

Pragyaan: Journal of Management (ISSN: 0974-5505) is a bi-annual double blind refereed, journal of

Institute of Management Studies, Dehradun. The journal is dedicated to develop, promote and coordinate

theory, research, and practice in the areas of Management, in both Indian as well as the global context. It aims

at bringing together both the academicians as well as practicing managers. Its aim is to publish conceptually sound articles and papers, which have the potential to enrich the existing

management education, theory and practice. The papers could deal with research on contemporary issues

covering the fields of general management; corporate strategy; policy and governance; finance, public policy;

IT; marketing; OB/HR; technology and manufacturing and other related areas of economics and social

sciences including macro as well as micro perspectives. Our journal provides food for thought to the managers in public as well as the private sector, consultants,

academicians and the students of management and other related disciplines. Though emphasis will be given

to empirical studies, but sound conceptual and application oriented papers are also welcome. We invite research papers, case studies and book reviews on management related issues for our subsequent

issues.

The papers should be prepared as per the guidelines and submitted to pragyaan.mgt@ims.edu.in

Warm regards

EditorPragyaan: Journal of ManagementInstitute of Management StudiesMakkawala GreensDehradun - 248009Email: pragyaan.mgt@ims.edu.in Tel: 91-135-3000600, 9927000210Fax: 91-135-3000700

Guidelines for Contributors

1. Manuscripts for publication should be typed in double space with a margin of 1.5 inches on both sides

to facilitate editing, only on one side of the paper and sent in duplicate to the Editor along with a soft

copy in the format of 12 point text single font- Times Roman and package – preferably MS Word for

Editorial convenience. All articles should include an abstract of about 150 words, and a few key

words.

2. Each manuscript should be accompanied by a declaration of the author(s) that the paper has neither

been published nor submitted for publication elsewhere.

3. Articles which are published should not be reproduced or reprinted in any form either in full or in part

without the prior permission of the editor.

4. Wherever copyrighted material is used, the authors should be accurate in reproduction and obtain

permission from the copyright holders, if necessary.

5. Papers submitted or presented in a seminar must be clearly indicated at the bottom of the first page.

6. Notes and references should be consecutively numbered and presented at the end of the article on

separate sheets of paper, and not at the foot of each page.

7. The articles can fall into any one of the following types: research based articles on management or IT

(with executive summaries), case studies, book reviews, letters to the editors, or interviews with

academicians/gurus/CEOs.

8. Footnotes, typed in single-space, should be numbered serially and placed at the end of the text.

Reference to literature cited should be carried within the text in brackets. The references, to be placed

after footnotes, should be listed alphabetically by author and chronologically for each author. It

should be kept as brief as possible.

9. Contributors are advised to be brief in introducing the subject and devote most of the paper to the

principal theme. The Journal prefers papers based on original data and fresh theoretical insights.

References to previous works should be made economically.

10. Present each figure and table near the relevant text. All tables must be consecutively numbered using

Arabic numerals with appropriate titles.

11. Write numbers in figures (rather than words) for exact measurement and series of quantities, including

percentages. Use thousands and millions rather than lakhs and crores.

12. Book review must contain the name of the author and the book reviewed place of publication and

publisher, date of publication, number of pages and price.

Call for Papers for Pragyaan: Journal of Management

Pragyaan: Journal of Management (ISSN: 0974-5505) is a bi-annual double blind refereed, journal of

Institute of Management Studies, Dehradun. The journal is dedicated to develop, promote and coordinate

theory, research, and practice in the areas of Management, in both Indian as well as the global context. It aims

at bringing together both the academicians as well as practicing managers. Its aim is to publish conceptually sound articles and papers, which have the potential to enrich the existing

management education, theory and practice. The papers could deal with research on contemporary issues

covering the fields of general management; corporate strategy; policy and governance; finance, public policy;

IT; marketing; OB/HR; technology and manufacturing and other related areas of economics and social

sciences including macro as well as micro perspectives. Our journal provides food for thought to the managers in public as well as the private sector, consultants,

academicians and the students of management and other related disciplines. Though emphasis will be given

to empirical studies, but sound conceptual and application oriented papers are also welcome. We invite research papers, case studies and book reviews on management related issues for our subsequent

issues.

The papers should be prepared as per the guidelines and submitted to pragyaan.mgt@ims.edu.in

Warm regards

EditorPragyaan: Journal of ManagementInstitute of Management StudiesMakkawala GreensDehradun - 248009Email: pragyaan.mgt@ims.edu.in Tel: 91-135-3000600, 9927000210Fax: 91-135-3000700

ABSTRACT

stThe Global paradigm shift in 21 Century from spiritualism to the materialism has affected all age groups

in some or other ways. This research paper is an effort to identify the difference between the compulsive

buying tendencies of working and non-working women. This research study attempts to (i) identify

differences in compulsive buying behavior of working and non working women and (ii) to identify the

contribution of this buying behavior of women in bridging the gap between competitive intelligence and

corporate strategy relating to delineating the incentives and benefits packages for women employees.

Key words: Compulsive Buying, working and non-working women

1. Introduction

The Global paradigm shift in 21st Century from Spiritualism to the materialism has affected all age groups in some or other ways. Changing life styles is propelling consumerism across all age groups. Due to this reworking atmosphere, there is a major transformation in the perceived status of women in society. With economic and social advancement in Indian society, women have stepped out and have bestowed principal contributing to the economic and social development of society. There is a sea change in the outlook and attitude towards women in today’s society, which is more liberal. Intricacy of consumption has increased many fold due to these changes [1]. Consequently, the risk of emergence of compulsive behaviour tendencies has increased. Presently, the major issue is how the changing social and economic environment is affecting the behaviour of women towards shopping and spending [2]. Causative efforts of women are making them more confident and autonomous. Women today are financially independent. Financial self-sufficiency of women strengthens their independent decisions making ability. There is a need to study that how this financial independence is affecting consumerist tendencies in women. Consumerist tendencies here means excessive buying tendency and lack of control on urge to buy. The subject of compulsive buying has been studied in western countries which reveal that women show more compulsiveness in buying. This paper is an attempt

to study the compulsive buying tendencies of Indian Women. This research paper is an effort to identify the relationship between recent paradigm shift and compulsive buying behaviour and employment status of women. It has been previously documented that women are to compulsive buying tendencies. Purchasing power and financial autonomy in the hands of working women make them more susceptible to such tendencies.

2. Review of Literature

Compulsive buying has emerged as an important aspect of consumer behaviour. Compulsive buying is an excessive buying behaviour or an uncontrollable desire to shop and spend. Previous researches and clinical surveys have shown that majority of compulsive buyers are women [3]. With increasing individuality in women the threat is more on emerging economies like India. It has been found that women are more susceptible to compulsive buying tendencies [5], [6], [7]. Women perceive shopping, buying and spending as a relaxation activity [8]. Women regard shopping as a leisure activity [9]. For them, shopping is delight [10]. Shopping and spending also plays an important role in identity related issues and it helps them to overcome these issues easily [11]. The compulsive buyers make typical purchase. They spend on modish and things that are high on fashion. They tend to buy products like fashionable clothing etc [12, [13], [14]. Women indulge in compulsive buying tendencies because they are so much

prone

A Comparative Study of Compulsive Buying Behaviour Between Working and Non-Working Women

Rimple Manchanda*

* Assistant Professor, Amity University, Noida

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 1

13. A brief resume of the author/s should accompany the research articles.

14. Manuscripts are accepted for publication on the understanding that they are subject to editorial

revisions. Proofs will not be sent to the authors.

15. Authors will receive a complimentary copy of the journal.

16. All manuscripts should be addressed to:

The EditorPRAGYAAN: Journal of ManagementInstitute of Management StudiesMakkawala GreensMussoorie Diversion RoadDehradun - 248009, Uttarakhand (India).Phones: 91-135-3000600, 9927000210Fax: 91-135-3000700E-mail: pragyaan.mgt@ims.edu.in

ABSTRACT

stThe Global paradigm shift in 21 Century from spiritualism to the materialism has affected all age groups

in some or other ways. This research paper is an effort to identify the difference between the compulsive

buying tendencies of working and non-working women. This research study attempts to (i) identify

differences in compulsive buying behavior of working and non working women and (ii) to identify the

contribution of this buying behavior of women in bridging the gap between competitive intelligence and

corporate strategy relating to delineating the incentives and benefits packages for women employees.

Key words: Compulsive Buying, working and non-working women

1. Introduction

The Global paradigm shift in 21st Century from Spiritualism to the materialism has affected all age groups in some or other ways. Changing life styles is propelling consumerism across all age groups. Due to this reworking atmosphere, there is a major transformation in the perceived status of women in society. With economic and social advancement in Indian society, women have stepped out and have bestowed principal contributing to the economic and social development of society. There is a sea change in the outlook and attitude towards women in today’s society, which is more liberal. Intricacy of consumption has increased many fold due to these changes [1]. Consequently, the risk of emergence of compulsive behaviour tendencies has increased. Presently, the major issue is how the changing social and economic environment is affecting the behaviour of women towards shopping and spending [2]. Causative efforts of women are making them more confident and autonomous. Women today are financially independent. Financial self-sufficiency of women strengthens their independent decisions making ability. There is a need to study that how this financial independence is affecting consumerist tendencies in women. Consumerist tendencies here means excessive buying tendency and lack of control on urge to buy. The subject of compulsive buying has been studied in western countries which reveal that women show more compulsiveness in buying. This paper is an attempt

to study the compulsive buying tendencies of Indian Women. This research paper is an effort to identify the relationship between recent paradigm shift and compulsive buying behaviour and employment status of women. It has been previously documented that women are to compulsive buying tendencies. Purchasing power and financial autonomy in the hands of working women make them more susceptible to such tendencies.

2. Review of Literature

Compulsive buying has emerged as an important aspect of consumer behaviour. Compulsive buying is an excessive buying behaviour or an uncontrollable desire to shop and spend. Previous researches and clinical surveys have shown that majority of compulsive buyers are women [3]. With increasing individuality in women the threat is more on emerging economies like India. It has been found that women are more susceptible to compulsive buying tendencies [5], [6], [7]. Women perceive shopping, buying and spending as a relaxation activity [8]. Women regard shopping as a leisure activity [9]. For them, shopping is delight [10]. Shopping and spending also plays an important role in identity related issues and it helps them to overcome these issues easily [11]. The compulsive buyers make typical purchase. They spend on modish and things that are high on fashion. They tend to buy products like fashionable clothing etc [12, [13], [14]. Women indulge in compulsive buying tendencies because they are so much

prone

A Comparative Study of Compulsive Buying Behaviour Between Working and Non-Working Women

Rimple Manchanda*

* Assistant Professor, Amity University, Noida

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 1

13. A brief resume of the author/s should accompany the research articles.

14. Manuscripts are accepted for publication on the understanding that they are subject to editorial

revisions. Proofs will not be sent to the authors.

15. Authors will receive a complimentary copy of the journal.

16. All manuscripts should be addressed to:

The EditorPRAGYAAN: Journal of ManagementInstitute of Management StudiesMakkawala GreensMussoorie Diversion RoadDehradun - 248009, Uttarakhand (India).Phones: 91-135-3000600, 9927000210Fax: 91-135-3000700E-mail: pragyaan.mgt@ims.edu.in

more concerned about their physical and social appearance that they tend to buy things that would work as appearance enhancers. Women love to pamper themselves, thus they find shopping as a way to enhance their mood and fuss over. Women have certain emotional and identity related dimensions that make them shop more [15]. It is easy to motivate women psychologically and stimulate them to shop and spend [16]. Thus, most of the advertisers and marketers today are targeting working women as they have autonomy in terms of decision making while making a purchase due to sufficient purchasing power in their hands. Due to this independence, working women tend to become more prone to compulsive buying behaviour. Almost all the studies done previously revealed that women are disproportionately affected by compulsive buying and the percentage ranges from 70% to 90% [18], [19]. It has been investigated that women are twice as much possessive about the money they earn and like to talk about it [20]. The tendency to buy is higher in women and they being compulsive buyers appear to be more obsessed for shopping and have strong belief about relationship between social status and shopping [21]. There is another view that homemaker being the traditional role for women, they are more likely to exhibit compulsive buying tendencies. Shopping has been considered as an activity that forms an important part in the errands of housewives [8], [9], [22]. Women’s shopping predisposition gets aggravated with dependence of their family on them in decision making while shopping [7]. They are responsible of grocery shopping, act as family expert advisers in shopping and can recognize easily the depletion of inventories at home [24] [26]. For women, shopping is a way of self-expression [9], and a tool to enhance their self-image [27], [28], [29].

This comparison of compulsive buying tendencies among working women and non-working women is not explicated in previous studies. The research is consistent with the previous researches that have elucidated that buying motives of women are psychologically goaded. Now the focus is on making comparisons of working and nonworking women on their buying habits.

In regard to compulsive buyer’s relationship with income level, the previous studies have revealed that income level is negatively related to compulsive buying tendencies [30]. It has also been researched that people at various income level are vulnerable to compulsive buying tendencies [13] [3] [6].

3. Objectives of Study

This research paper has several objectives; first, is to identify the relationship between spending habits of

working and non-working women; second, is to identify the relationship between income and compulsive buying tendencies as the more purchasing power in hands is supposed to be positively related to the compulsive buying behaviour; third is to provide some suggestions to reduce the tendency of compulsive buying behaviour among women who are more prone to compulsive buying tendencies.

4. Hypothesis

Null Hypothesis – H0: There is no significant difference in compulsive buying tendencies of working and non-working women. There is no difference in sample mean of working and non working women.

Alternate Hypothesis - Ha: There is a significant difference in compulsive buying tendencies of working and non-working women. The sample means of working and non working women are not equal.

5. Methodology

The primary data was collected through structured questionnaire. This empirical research, based on questionnaire survey, was carried out on convenience sample of working women and non working women in Delhi NCR region in the age-group of 25-60 years. 100 questionnaires were floated through e mail. The working women sampling is done from faculty and staff of educational institutes and female staff in corporate offices. The sample of non-working women is taken from the non working female family members of students studying in different colleges and universities in Delhi NCR, with focus on the women in the family who stay at home and devote their hundred percent time in taking care of their family.

The questionnaire administered was divided into two parts. In First part, the demographic and personal details were solicited. The information regarding age, education, occupation etc was sought to enable the comparison between working and non-working women and also the relationship between income level and buying tendencies. The second part of the questionnaire was a survey based on Compulsive buying measurement scale of Valence, d’Astous and Fortier, 1988 (Annexure I), which is 11 item scale validated previously. It is a five-point likert-type scale ranging from 1=strongly disagree to 5=strongly agree. Higher scores indicated stronger compulsive buying

A Comparative Study of Compulsive Buying Behavior between Working and Non-Working Women

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 20122

A Comparative Study of Compulsive Buying Behavior between Working and Non-Working Women

tendencies. With this scale, maximum score that one can achieve is 55, minimum score is 11 and person scoring 33 score points would be considered as neutral. Person scoring above 33 would be considered as compulsive buyer.

Table 1: Showing Compulsive buying Scores

Score Range / Implications Score

Maximum Score 55

Minimum Score 11

Neutral 33

The hypothesis was tested by calculating the difference in mean compulsive buying scores of working and non-working women to find if intensity of compulsive buying tendencies depends on employment status or not. The effect of employment status on compulsive buying was studied. T-test is used for data analysis.

6. Results

Out of 100 questionnaires sent, 59 were returned with response rate of 59%. Out of which 19 questionnaires were incomplete, thus were not included in analysis which reduced the sample size to 40. Out of 40, 20 were for working and 20 for non-working women, making the ratio of 1:1.

Out of total survey response received from working women and non-working women, the summary analysis of demographics is in a Table 2. 70% of working women respondents have scored above the cut off level of 33 and only 30% of non working women have scored above the cut off score of 33. 40% of working women respondents fall in the age group of 25 to 30 years, 20% are from 30 to 40 years of age and rest 40% are from 40 to 60 years of age. Out of non working women respondents, 20% fall in the category of 25 to 30 years, 20 % are between 30 to 40 years and 60% are from 40 to 60 years of age. The annual income categorization of working women is: 15% are earning upto Rs. 3,00,000/-, 35% earn between Rs. 3,00,001/- and Rs. 4,50,000/-, 25% earn between Rs. 4,50,001/- and Rs. 5,50,000/- and 25% earn above Rs. 5,50,001/-.

Table 3 shows the mean score of compulsive buying for working and non-working women. In categories upto 30, and for 40 to below 60, mean score for working women is above the neutral score of 33. But, the working women of age between 30 & 40 have shown less compulsive buying intensity

Table 4 shows the comparison of working and non-working women on the basis of education. The effect of education on compulsive buying score shows that working women in both the categories have attained the mean score above the neutral score and working women at all the education level exhibit higher compulsive buying tendencies as compared to non working women.

The relationship between compulsive buying mean score and the income level of working women has been presented in Table - 5:

From table 5, It is observed that as the income has increased the compulsive buying score of working women has fallen. This is in agreement with previous research which concluded that the compulsive buying tendencies are not influenced by income level and it is the urge that

1 20 0H x x=-=

1 2

1 2 1 2

0

. . ( )

aH x x

i e either x x or x x twotail test

=-¹

> <

Table 2: Showing Scorewise Percentage of Working and Non-Working Women

Score RangeWorking Women

Non Working Women

Score below average(below 33)

70% 30%

Score above average(above 33)

30% 70%

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 3

Table 3: Showing Mean Score of Compulsive buying

DemographicsN=40 Working

WomenNon Working

Women

Mean Compulsive Buying Score

Age

Upto 30 yrs 42 22.25

30-40 yrs 28.25 25.5

40 to below 60 35.25 31.92

Table 4: Showing Educationwise Mean Score of Compulsive buying

DemographicsN=40 Working

WomenNon Working

Women

Mean Compulsive Buying Score

Age

Education Upto graduation

35.5 28.42

Post Graduation and above

36.81 29.125

Table 5: Showing Incomewise Mean Score of Compulsive buying

DemographicsN=40 Working

WomenNon Working

Women

Mean Compulsive Buying Score

IncomeUpto 5,00,000 39.1 NA

5,00,001 and above

34 NA

more concerned about their physical and social appearance that they tend to buy things that would work as appearance enhancers. Women love to pamper themselves, thus they find shopping as a way to enhance their mood and fuss over. Women have certain emotional and identity related dimensions that make them shop more [15]. It is easy to motivate women psychologically and stimulate them to shop and spend [16]. Thus, most of the advertisers and marketers today are targeting working women as they have autonomy in terms of decision making while making a purchase due to sufficient purchasing power in their hands. Due to this independence, working women tend to become more prone to compulsive buying behaviour. Almost all the studies done previously revealed that women are disproportionately affected by compulsive buying and the percentage ranges from 70% to 90% [18], [19]. It has been investigated that women are twice as much possessive about the money they earn and like to talk about it [20]. The tendency to buy is higher in women and they being compulsive buyers appear to be more obsessed for shopping and have strong belief about relationship between social status and shopping [21]. There is another view that homemaker being the traditional role for women, they are more likely to exhibit compulsive buying tendencies. Shopping has been considered as an activity that forms an important part in the errands of housewives [8], [9], [22]. Women’s shopping predisposition gets aggravated with dependence of their family on them in decision making while shopping [7]. They are responsible of grocery shopping, act as family expert advisers in shopping and can recognize easily the depletion of inventories at home [24] [26]. For women, shopping is a way of self-expression [9], and a tool to enhance their self-image [27], [28], [29].

This comparison of compulsive buying tendencies among working women and non-working women is not explicated in previous studies. The research is consistent with the previous researches that have elucidated that buying motives of women are psychologically goaded. Now the focus is on making comparisons of working and nonworking women on their buying habits.

In regard to compulsive buyer’s relationship with income level, the previous studies have revealed that income level is negatively related to compulsive buying tendencies [30]. It has also been researched that people at various income level are vulnerable to compulsive buying tendencies [13] [3] [6].

3. Objectives of Study

This research paper has several objectives; first, is to identify the relationship between spending habits of

working and non-working women; second, is to identify the relationship between income and compulsive buying tendencies as the more purchasing power in hands is supposed to be positively related to the compulsive buying behaviour; third is to provide some suggestions to reduce the tendency of compulsive buying behaviour among women who are more prone to compulsive buying tendencies.

4. Hypothesis

Null Hypothesis – H0: There is no significant difference in compulsive buying tendencies of working and non-working women. There is no difference in sample mean of working and non working women.

Alternate Hypothesis - Ha: There is a significant difference in compulsive buying tendencies of working and non-working women. The sample means of working and non working women are not equal.

5. Methodology

The primary data was collected through structured questionnaire. This empirical research, based on questionnaire survey, was carried out on convenience sample of working women and non working women in Delhi NCR region in the age-group of 25-60 years. 100 questionnaires were floated through e mail. The working women sampling is done from faculty and staff of educational institutes and female staff in corporate offices. The sample of non-working women is taken from the non working female family members of students studying in different colleges and universities in Delhi NCR, with focus on the women in the family who stay at home and devote their hundred percent time in taking care of their family.

The questionnaire administered was divided into two parts. In First part, the demographic and personal details were solicited. The information regarding age, education, occupation etc was sought to enable the comparison between working and non-working women and also the relationship between income level and buying tendencies. The second part of the questionnaire was a survey based on Compulsive buying measurement scale of Valence, d’Astous and Fortier, 1988 (Annexure I), which is 11 item scale validated previously. It is a five-point likert-type scale ranging from 1=strongly disagree to 5=strongly agree. Higher scores indicated stronger compulsive buying

A Comparative Study of Compulsive Buying Behavior between Working and Non-Working Women

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 20122

A Comparative Study of Compulsive Buying Behavior between Working and Non-Working Women

tendencies. With this scale, maximum score that one can achieve is 55, minimum score is 11 and person scoring 33 score points would be considered as neutral. Person scoring above 33 would be considered as compulsive buyer.

Table 1: Showing Compulsive buying Scores

Score Range / Implications Score

Maximum Score 55

Minimum Score 11

Neutral 33

The hypothesis was tested by calculating the difference in mean compulsive buying scores of working and non-working women to find if intensity of compulsive buying tendencies depends on employment status or not. The effect of employment status on compulsive buying was studied. T-test is used for data analysis.

6. Results

Out of 100 questionnaires sent, 59 were returned with response rate of 59%. Out of which 19 questionnaires were incomplete, thus were not included in analysis which reduced the sample size to 40. Out of 40, 20 were for working and 20 for non-working women, making the ratio of 1:1.

Out of total survey response received from working women and non-working women, the summary analysis of demographics is in a Table 2. 70% of working women respondents have scored above the cut off level of 33 and only 30% of non working women have scored above the cut off score of 33. 40% of working women respondents fall in the age group of 25 to 30 years, 20% are from 30 to 40 years of age and rest 40% are from 40 to 60 years of age. Out of non working women respondents, 20% fall in the category of 25 to 30 years, 20 % are between 30 to 40 years and 60% are from 40 to 60 years of age. The annual income categorization of working women is: 15% are earning upto Rs. 3,00,000/-, 35% earn between Rs. 3,00,001/- and Rs. 4,50,000/-, 25% earn between Rs. 4,50,001/- and Rs. 5,50,000/- and 25% earn above Rs. 5,50,001/-.

Table 3 shows the mean score of compulsive buying for working and non-working women. In categories upto 30, and for 40 to below 60, mean score for working women is above the neutral score of 33. But, the working women of age between 30 & 40 have shown less compulsive buying intensity

Table 4 shows the comparison of working and non-working women on the basis of education. The effect of education on compulsive buying score shows that working women in both the categories have attained the mean score above the neutral score and working women at all the education level exhibit higher compulsive buying tendencies as compared to non working women.

The relationship between compulsive buying mean score and the income level of working women has been presented in Table - 5:

From table 5, It is observed that as the income has increased the compulsive buying score of working women has fallen. This is in agreement with previous research which concluded that the compulsive buying tendencies are not influenced by income level and it is the urge that

1 20 0H x x=-=

1 2

1 2 1 2

0

. . ( )

aH x x

i e either x x or x x twotail test

=-¹

> <

Table 2: Showing Scorewise Percentage of Working and Non-Working Women

Score RangeWorking Women

Non Working Women

Score below average(below 33)

70% 30%

Score above average(above 33)

30% 70%

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 3

Table 3: Showing Mean Score of Compulsive buying

DemographicsN=40 Working

WomenNon Working

Women

Mean Compulsive Buying Score

Age

Upto 30 yrs 42 22.25

30-40 yrs 28.25 25.5

40 to below 60 35.25 31.92

Table 4: Showing Educationwise Mean Score of Compulsive buying

DemographicsN=40 Working

WomenNon Working

Women

Mean Compulsive Buying Score

Age

Education Upto graduation

35.5 28.42

Post Graduation and above

36.81 29.125

Table 5: Showing Incomewise Mean Score of Compulsive buying

DemographicsN=40 Working

WomenNon Working

Women

Mean Compulsive Buying Score

IncomeUpto 5,00,000 39.1 NA

5,00,001 and above

34 NA

arises irrespective of income level that makes a person to buy excessive without thinking much about the consequences [32], [33].

The Mean, t-statistics etc. have been used to test the hypothesis in current study. The outcome of investigation is summarized in Tables 6 and 7.

Table – 6 shows the group statistics. It shows the descriptive statistics of our variables i.e. working and non working women. It shows the mean score of working and non working women. The mean compulsive buying score is 36.55 for working women which is above the neutral score of 33 and that of non-working women is 28.7 which is below the neutral score. This implies that the women who are employed intend to buy more than those who are not employed. Table 6 also clearly shows that the working women are more prone to compulsive buying tendencies than non-working women as the sample mean of working women is significantly higher than non working women. Not only the working women had higher compulsive buying scores, they are also above the average score and the variation is also considerable among them as compare to non-working women. Working women are more prone to compulsive buying tendencies than non-working women.

Table – 7 shows independent sample t-statistics for the study conducted at 95% confidence interval. The means of compulsive buying scores of working and non working women are calculated and the difference of two means is tested with the help of difference in two independent sample t-statistics. From first part of the table, we can infer

that the significance for Levene's test is 0.126 which is above 0.05 i.e. the variability in your two conditions is about the same. In this case, we will consider "Equal Variances Assumed". Levene’s Test for Equality of Variances basically determines the two conditions having the same or different amounts of variability between scores. From Table 7, we can infer the results whether the Means for the two groups were significantly different or not. The Sig 2-tailed value is 0.006 which is less than 0.05. The p-value is less than the pre-specified alpha level, thus, I conclude that mean difference between compulsive buying tendencies of working and non working women is statistically significantly different from zero and that there is a statistically significant difference between the two conditions. The t-test at 95% confidence interval rejects the null hypothesis, which proves that there is a significant difference in compulsive buying tendencies of working and non-working women. Rejecting the null hypothesis makes the alternate hypothesis true. The employment status of women does affect their buying behaviour.

7. Discussion

The above study supports the alternative hypotheses as it indicates that compulsiveness in purchase behaviour and spending money is on higher side for the working women. The purchasing power and financial autonomy makes the working women self dependent in financial decision making. Since social setting in which one subsists is one of the major factor that affect the buying behaviour [34], [35], [36]. 30% of non working women scored above the average score of 33. This could be a result of social pressure and demonstration effect. Non- working women sometimes indulges in excessive shopping and spending so as to maintain their social class [38] and to match the social environment around them. The other way of looking at it is that shopping gives them an opportunity to socialize [6], [22]. Women, during their socialization congregate their perception about what would be the customary behaviour. Since the socialization of working women with peers, colleagues, clients etc make them more exposed to social environment as compared to non-working women, who only get to socialize with other non-working women of their own class [23].

Women show compulsiveness in shopping as they look for substantiation of sense of worth through shopping and spending [28]. The working women have scored high on compulsive buying scale as their pressure to match the demonstration requirement in terms of purchase and spending are more as they are exposed to comparatively wider social pressure. The other reason could be that the working women are more stressed due to anxiety and high

Table 6: Group Statistics

Code N Mean Std. Std. ErrorDeviation Mean

CBS W 20 36.5500 9.75206 2.18063

N 20 28.7000 6.92896 1.54936

Note: CBS(W/N): Compulsive buying score of working / non-working women

Table 7: Independent Samples Test

13.284592.415412.675017.850000.00634.2872.935

13.265272.434732.675017.850000.006382.9350.1262.452

TotalEqual

variances not assumed

Equal variances assumed

95% Confidence Interval of the

Difference

Std. Error

Differ-ence

Mean Differ-ence

Sig.(2-

tailed)dftSig.F

UpperLower

Levene's Test for

Equality of Variances

t-test for Equality of Means

A Comparative Study of Compulsive Buying Behavior between Working and Non-Working Women

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 20124

work pressure. They do shopping to do away with strain. Shopping plays a psychosomatic role in their lives [27], [38]. For them shopping is a leisure activity. Considering this aspect, it can be concluded that it is not only the working women’s financial autonomy that make them vulnerable to compulsive buying tendencies but also socialization. Credit card availability is also believed to be one of the reason for overspending [2], [39], [40], working women, being the earning individual can avail the facility of credit cards that give them access to more purchasing power. The recent growth in retail malls and other facilities of online buying work as a fuel in fire for increasing tendency to buy. Shopping which traditionally was considered as a path of moral and mystical putrefaction [41] is now regarded as sign of social conceit.

8. Practical Implications:

The study has rejected the null hypothesis that compulsive buying tendencies are more or less similar in working and non working women. Thus, the acceptance of the alternate hypothesis makes it an important finding for marketers. The study had practical implications for marketers as they can design their advertisement campaigns that represent metaphors and similes that fascinate the working women [42]. More emphasis can be given on the products that are ready to use or that make life easier. The spotlight is on gratifying the materialistic requirement rather than commonplace purchases. Acquisition of consumer goods is regarded as a means for achieving an idiosyncratic and social satisfaction and to articulate a substance of distinctiveness [44]. Policy makers need to consider as this behaviour harms the society as a whole [43], [5]. It can result in profligacy, acute liability, impoverishment and economic failure [45]. Also, broadly speaking, this research can be a significant contribution in the organizations in framing the incentives and benefits packages for women employees. The Performance based enticement for delivering better and dispensing more could bring forth two-fold benefit. Organizations can motivate women by passing on more monetary benefits, which would encourage them on one hand and make them financially more autonomous on the other hand. Organizations can identify positive attitude of women employees towards money and compulsivity in their buying behaviour and use the outcome in devising the incentive programs and developing organizational culture.

9. Conclusion

Since this research has found that there is significant difference in the compulsive buying tendencies of working and non working women, nonworking women are less compulsive buyers than working women and level of

socialization could be one of the factors for the same. Future research is required to study the effect of socio-cultural environment on the buying behaviour of women. Since this is focused on buying behaviour of working and non working women, further studies are required keeping other cluster of individuals as a target group. The study is conducted on a small sample thus it is not suitable for generalization though. Further, this study can be extended by taking large sample. The findings of this paper are preliminary as the sample was small and compulsive buying tendencies were assessed using a single instrument. This further calls for studies using other compulsive buying instruments available or development of new scale that is more appropriate to Indian population.

10. References

[1] Mick, David Glen, Susan Broniarczyk, and Jonathan Haidt (2004), “Choose, Choose, Choose, Choose, Choose, Choose, Choose: Emerging and Prospective Research on the Deleterious Effects of Living in Consumer Hyperchoice,” Journal of Business Ethics, 52 (2), 207-211.

[2] Joji, N. A., and P. T. Raveendran. (2008) “Compulsive Buying Behaviour in Indian Consumers and its impact on Credit Default – An Emerging Paradigm” Kozhikode, India: Indian Institute of Management

[3] Black, D. W. (2004). Compulsive shopping. In E. Hollander (Ed.). Handbook of impulse control disorders. American Psychiatric Publishing

[4] O’Guinn, T. C., & Faber, R. J. (1989). Compulsive buying: A phenomenological exploration. Journal of Consumer Research, 16, 147–157

[5] Faber, R. J., & O’Guinn, T. C. (1992). A clinical screener for compulsive buying. Journal of Consumer Research, 19, 459–469.

[6] D’Astous, A. (1990). An inquiry into the compulsive side of normal consumers. Journal of Consumer Policy, 13, 15–31.

[7] Scherhorn, G., Reisch, L. A., & Raab, L. A. (1990). Compulsive buying in West Germany: An empirical investigation. Journal of Consumer Policy, 13, 155–189.

[8] Campbell, C. (2000). Shopaholics, spendaholics, and the question of gender. In A. Benson (Ed.), I shop, therefore I am: Compulsive buying and the search for self (pp. 57–75). New York: Aronson.

[9] Elliott, R. (1994). Compulsive consumption: Function and fragmentation in postmodernity. Journal of Consumer Policy, 17, 159–179.

[10] Faber, Ronald J., Thomas C. O'Guinn, and Raymond K r y ch (1987 ) , "Compu l s i ve

A Comparative Study of Compulsive Buying Behavior between Working and Non-Working Women

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 5

arises irrespective of income level that makes a person to buy excessive without thinking much about the consequences [32], [33].

The Mean, t-statistics etc. have been used to test the hypothesis in current study. The outcome of investigation is summarized in Tables 6 and 7.

Table – 6 shows the group statistics. It shows the descriptive statistics of our variables i.e. working and non working women. It shows the mean score of working and non working women. The mean compulsive buying score is 36.55 for working women which is above the neutral score of 33 and that of non-working women is 28.7 which is below the neutral score. This implies that the women who are employed intend to buy more than those who are not employed. Table 6 also clearly shows that the working women are more prone to compulsive buying tendencies than non-working women as the sample mean of working women is significantly higher than non working women. Not only the working women had higher compulsive buying scores, they are also above the average score and the variation is also considerable among them as compare to non-working women. Working women are more prone to compulsive buying tendencies than non-working women.

Table – 7 shows independent sample t-statistics for the study conducted at 95% confidence interval. The means of compulsive buying scores of working and non working women are calculated and the difference of two means is tested with the help of difference in two independent sample t-statistics. From first part of the table, we can infer

that the significance for Levene's test is 0.126 which is above 0.05 i.e. the variability in your two conditions is about the same. In this case, we will consider "Equal Variances Assumed". Levene’s Test for Equality of Variances basically determines the two conditions having the same or different amounts of variability between scores. From Table 7, we can infer the results whether the Means for the two groups were significantly different or not. The Sig 2-tailed value is 0.006 which is less than 0.05. The p-value is less than the pre-specified alpha level, thus, I conclude that mean difference between compulsive buying tendencies of working and non working women is statistically significantly different from zero and that there is a statistically significant difference between the two conditions. The t-test at 95% confidence interval rejects the null hypothesis, which proves that there is a significant difference in compulsive buying tendencies of working and non-working women. Rejecting the null hypothesis makes the alternate hypothesis true. The employment status of women does affect their buying behaviour.

7. Discussion

The above study supports the alternative hypotheses as it indicates that compulsiveness in purchase behaviour and spending money is on higher side for the working women. The purchasing power and financial autonomy makes the working women self dependent in financial decision making. Since social setting in which one subsists is one of the major factor that affect the buying behaviour [34], [35], [36]. 30% of non working women scored above the average score of 33. This could be a result of social pressure and demonstration effect. Non- working women sometimes indulges in excessive shopping and spending so as to maintain their social class [38] and to match the social environment around them. The other way of looking at it is that shopping gives them an opportunity to socialize [6], [22]. Women, during their socialization congregate their perception about what would be the customary behaviour. Since the socialization of working women with peers, colleagues, clients etc make them more exposed to social environment as compared to non-working women, who only get to socialize with other non-working women of their own class [23].

Women show compulsiveness in shopping as they look for substantiation of sense of worth through shopping and spending [28]. The working women have scored high on compulsive buying scale as their pressure to match the demonstration requirement in terms of purchase and spending are more as they are exposed to comparatively wider social pressure. The other reason could be that the working women are more stressed due to anxiety and high

Table 6: Group Statistics

Code N Mean Std. Std. ErrorDeviation Mean

CBS W 20 36.5500 9.75206 2.18063

N 20 28.7000 6.92896 1.54936

Note: CBS(W/N): Compulsive buying score of working / non-working women

Table 7: Independent Samples Test

13.284592.415412.675017.850000.00634.2872.935

13.265272.434732.675017.850000.006382.9350.1262.452

TotalEqual

variances not assumed

Equal variances assumed

95% Confidence Interval of the

Difference

Std. Error

Differ-ence

Mean Differ-ence

Sig.(2-

tailed)dftSig.F

UpperLower

Levene's Test for

Equality of Variances

t-test for Equality of Means

A Comparative Study of Compulsive Buying Behavior between Working and Non-Working Women

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 20124

work pressure. They do shopping to do away with strain. Shopping plays a psychosomatic role in their lives [27], [38]. For them shopping is a leisure activity. Considering this aspect, it can be concluded that it is not only the working women’s financial autonomy that make them vulnerable to compulsive buying tendencies but also socialization. Credit card availability is also believed to be one of the reason for overspending [2], [39], [40], working women, being the earning individual can avail the facility of credit cards that give them access to more purchasing power. The recent growth in retail malls and other facilities of online buying work as a fuel in fire for increasing tendency to buy. Shopping which traditionally was considered as a path of moral and mystical putrefaction [41] is now regarded as sign of social conceit.

8. Practical Implications:

The study has rejected the null hypothesis that compulsive buying tendencies are more or less similar in working and non working women. Thus, the acceptance of the alternate hypothesis makes it an important finding for marketers. The study had practical implications for marketers as they can design their advertisement campaigns that represent metaphors and similes that fascinate the working women [42]. More emphasis can be given on the products that are ready to use or that make life easier. The spotlight is on gratifying the materialistic requirement rather than commonplace purchases. Acquisition of consumer goods is regarded as a means for achieving an idiosyncratic and social satisfaction and to articulate a substance of distinctiveness [44]. Policy makers need to consider as this behaviour harms the society as a whole [43], [5]. It can result in profligacy, acute liability, impoverishment and economic failure [45]. Also, broadly speaking, this research can be a significant contribution in the organizations in framing the incentives and benefits packages for women employees. The Performance based enticement for delivering better and dispensing more could bring forth two-fold benefit. Organizations can motivate women by passing on more monetary benefits, which would encourage them on one hand and make them financially more autonomous on the other hand. Organizations can identify positive attitude of women employees towards money and compulsivity in their buying behaviour and use the outcome in devising the incentive programs and developing organizational culture.

9. Conclusion

Since this research has found that there is significant difference in the compulsive buying tendencies of working and non working women, nonworking women are less compulsive buyers than working women and level of

socialization could be one of the factors for the same. Future research is required to study the effect of socio-cultural environment on the buying behaviour of women. Since this is focused on buying behaviour of working and non working women, further studies are required keeping other cluster of individuals as a target group. The study is conducted on a small sample thus it is not suitable for generalization though. Further, this study can be extended by taking large sample. The findings of this paper are preliminary as the sample was small and compulsive buying tendencies were assessed using a single instrument. This further calls for studies using other compulsive buying instruments available or development of new scale that is more appropriate to Indian population.

10. References

[1] Mick, David Glen, Susan Broniarczyk, and Jonathan Haidt (2004), “Choose, Choose, Choose, Choose, Choose, Choose, Choose: Emerging and Prospective Research on the Deleterious Effects of Living in Consumer Hyperchoice,” Journal of Business Ethics, 52 (2), 207-211.

[2] Joji, N. A., and P. T. Raveendran. (2008) “Compulsive Buying Behaviour in Indian Consumers and its impact on Credit Default – An Emerging Paradigm” Kozhikode, India: Indian Institute of Management

[3] Black, D. W. (2004). Compulsive shopping. In E. Hollander (Ed.). Handbook of impulse control disorders. American Psychiatric Publishing

[4] O’Guinn, T. C., & Faber, R. J. (1989). Compulsive buying: A phenomenological exploration. Journal of Consumer Research, 16, 147–157

[5] Faber, R. J., & O’Guinn, T. C. (1992). A clinical screener for compulsive buying. Journal of Consumer Research, 19, 459–469.

[6] D’Astous, A. (1990). An inquiry into the compulsive side of normal consumers. Journal of Consumer Policy, 13, 15–31.

[7] Scherhorn, G., Reisch, L. A., & Raab, L. A. (1990). Compulsive buying in West Germany: An empirical investigation. Journal of Consumer Policy, 13, 155–189.

[8] Campbell, C. (2000). Shopaholics, spendaholics, and the question of gender. In A. Benson (Ed.), I shop, therefore I am: Compulsive buying and the search for self (pp. 57–75). New York: Aronson.

[9] Elliott, R. (1994). Compulsive consumption: Function and fragmentation in postmodernity. Journal of Consumer Policy, 17, 159–179.

[10] Faber, Ronald J., Thomas C. O'Guinn, and Raymond K r y ch (1987 ) , "Compu l s i ve

A Comparative Study of Compulsive Buying Behavior between Working and Non-Working Women

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 5

Consumption," in Advances in Consumer Research, Vol. 14, eds. Melanie Wallendorf and Paul Anderson, Provo, UT: Association for Consumer Research, 132-135.

[11] Dittmar, H., & Drury, J. (2000). Self-image – is it in the bag? A qualitative comparison between ordinary and excessive consumers. Journal of Economic Psychology, 21, 109–142.

[12] Johnson, T., & Attmann, J. (2009). Compulsive buying in a product specific context: clothing. Journal of fashion Marketing and Management, Vol. 13, No.3, pp. 394-405

[13] Christenson, G. A., Faber, R. J., de Zwaan, M., & Raymond, N. C. (1994). Compulsive buying: Descriptive characteristics and psychiatric co-morbidity. Journal of Clinical Psychiatry, 55, 5–11.

[14] Schlosser, S., Black, D. W., Repertinger, S., & Freet, D. (1994). Compulsive buying: Demography, phenomenology, and co morbidity in 46 subjects. General Hospital Psychiatry, 16, 205–212.

[15] Babin, B. J., Darden, W. R., & Griffin, M. (1994). Work and/or fun: Measuring hedonic and utilitarian shopping value. Journal of Consumer Research, 20, 644–656.

[16] Dittmar, H. (2004a). Are you what you have? Consumer society and our sense of identity. Psychologist, 17, 104–108.

[17] Dittmar, H. (2004b). Understanding and diagnosing compulsive buying. In R. Coombs (Ed.), Handbook of addictive disorders: A practical guide to diagnosis and treatment. New York: Wiley, Chap. 13.

[18] Hanley, A., & Wilhelm, M. S. (1992). Compulsive buying: An exploration into self-esteem and money attitudes. Journal of Economic Psychology, 13, 5–18

[19] Black, D. W., Repertinger, S., Gaffney, G. R., & Gabel, J. (1998). Family history and psychiatric comorbidity in person with compulsive buying. American Journal of Psychiatry, 155, 960–963

[20] Rubenstein, C. (1981), “Money and self-esteem, relationships, secrecy, envy, satisfaction”, Psychology Today, Vol. 15 No. 5, pp. 29-44.

[21] Roberts, J.A. (1998), “Compulsive buying among college students: an investigation of its antecedents, consequences, and implications for public policy”, The Journal of Consumer Affairs, Vol. 32 No. 2, pp. 295-319.

[22] Lunt, P. K., & Livingstone, S. M. (1992). Mass consumption and personal identity. Buckingham: Open University Press

[23] Todd Weaver, George P Moschis, and Teresa Davis,

“Antecedents of Materialism and Compulsive Consumption: A life Course Study in Australia” Journal of Australian Marketing, 19(4), (Nov, 2011), 247-256.

[24] Goldman, Arieh and Johny K. Johansson (1978), "Determinants of Search for Lower Prices: An Empirical Assessment of the Economics of Information Theory,"Journal of Consumer Research, 5 (December), 176-186.

[25] Dittmar, H., Long, K., & Meek, R. (2004). Buying on the internet: Gender differences in online and conventional buying motivations. Sex Roles, 50, 423–444.

[26] Urbany, J. E., P. R. Dickson and R. Kalapuracal (1996): Price Search in the Retail Grocery Market. Journal of Marketing, 60 (April), 91–104

[27] Dittmar, H. (2000). The role of self-image in excessive buying. In A. Benson (Ed.), I shop, therefore I am: Compulsive buying and the search for self (pp. 105–132). London and New York: Aronson.

[28] Dittmar, H., Beattie, J., & Friese, S. (1995). Gender identity and material symbols: Objects and decision considerations in impulse purchases. Journal of Economic Psychology, 16, 491–511.

[28] Krueger DW (1988). On Compulsive Shopping and Spending: A Psychodynamic Inquiry. American J. Psychotherapy. 42(10):574-584.

[30] Kuzma JM, Black DW (2006). Compulsive shopping: When spending begins to consume the consumer. J. Fam. Pract., 5(7): 27-40

[31] Scherhorn, G. (1990). The compulsive trait in buying behaviour. Journal of Consumer Policy, 13, 33–51.

[32] Bayley, G., & Nancarrow, C. (1998). Impulsive Purchaseing: A qualatative exploration of the phenomenon. Qualitative Marketing Research, 1(2), 17-27

[33] Kecen, J.J., & Lee, J. A. (2002) The influence of culture on consumer impulsive buying behaviour. Journal of Consumer Psychology, 12(2), 163-176

[34] Damon J (1988). Shopaholics. Los Angeles, CA: Price Stem Sloan,Inc.

[35] Faber, R. J., & O’Guinn, T. C. (1992). A clinical screener for compulsive buying. Journal of Consumer Research, 19, 459–469.

[36] Valence, Gilles, Alain d'Astous, and Louis Fortier (1988), "Compulsive Buying: Concept and Measurement," Journal of Consumer Policy, 11, 419-433.

[37] McCracken, G. (1990). Culture and consumption. Indianapolis: Indiana University Press.

A Comparative Study of Compulsive Buying Behavior between Working and Non-Working Women

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 20126

[38] Dittmar, H. (2001). Impulse buying in ordinary and compulsive consumers. In J. Baron, G. Loomes, & E. Weber (Eds.), Conflict and Tradeoffs in Decision-Making (pp. 110–135). Cambridge: Cambridge University Press.

[39] Joireman, J., Kees, J., & Sprott, D. (2010). Concern with immediate consequences magnifies the impact of compulsive buying tendencies on college student’ credit card debt. Journal of Consumer Affairs, Vol. 44, No. 1, pp 155-178

[40] Schor, J.B. (1998). The overspent American. New York: Harper Perennial Publishing.

[41] Hirschman EC (1992). The Consciousness of Addiction: Toward a General Theory of Compulsive Consumption. J. Consumer. Res. 19 (9): 155-179.

[42] Kerin, R. A., S. W. Hertley, and Rudelius. 2011. Marketing, 10th ed. (McGraw-Hill Irwin, New York.

[43] Faber, R. (2000). A systematic investigation into compulsive buying. In A. Benson (Ed.), I shop, therefore, I am (pp. 27– 53). Northvale, NJ: Jason Aronson Inc.

[44] Dittmar, H. & Beattie, J. (1998). Impulsive and Excessive Buying Behaviour. In Taylor-Gooby, P. (ed.). Choice and Public Policy: The Limits to Welfare Markets. Great Britain: Macmillan Press, 123-144

[45] McElroy, S., Satlin, A., Pope Jr., H., Keck Jr., P., & Hudson, J. (1991). Treatment of compulsive shopping with antidepressants:A report of three cases. Annals of Clinical Psychiatry,3, 199–204.

A Comparative Study of Compulsive Buying Behavior between Working and Non-Working Women

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 7

Consumption," in Advances in Consumer Research, Vol. 14, eds. Melanie Wallendorf and Paul Anderson, Provo, UT: Association for Consumer Research, 132-135.

[11] Dittmar, H., & Drury, J. (2000). Self-image – is it in the bag? A qualitative comparison between ordinary and excessive consumers. Journal of Economic Psychology, 21, 109–142.

[12] Johnson, T., & Attmann, J. (2009). Compulsive buying in a product specific context: clothing. Journal of fashion Marketing and Management, Vol. 13, No.3, pp. 394-405

[13] Christenson, G. A., Faber, R. J., de Zwaan, M., & Raymond, N. C. (1994). Compulsive buying: Descriptive characteristics and psychiatric co-morbidity. Journal of Clinical Psychiatry, 55, 5–11.

[14] Schlosser, S., Black, D. W., Repertinger, S., & Freet, D. (1994). Compulsive buying: Demography, phenomenology, and co morbidity in 46 subjects. General Hospital Psychiatry, 16, 205–212.

[15] Babin, B. J., Darden, W. R., & Griffin, M. (1994). Work and/or fun: Measuring hedonic and utilitarian shopping value. Journal of Consumer Research, 20, 644–656.

[16] Dittmar, H. (2004a). Are you what you have? Consumer society and our sense of identity. Psychologist, 17, 104–108.

[17] Dittmar, H. (2004b). Understanding and diagnosing compulsive buying. In R. Coombs (Ed.), Handbook of addictive disorders: A practical guide to diagnosis and treatment. New York: Wiley, Chap. 13.

[18] Hanley, A., & Wilhelm, M. S. (1992). Compulsive buying: An exploration into self-esteem and money attitudes. Journal of Economic Psychology, 13, 5–18

[19] Black, D. W., Repertinger, S., Gaffney, G. R., & Gabel, J. (1998). Family history and psychiatric comorbidity in person with compulsive buying. American Journal of Psychiatry, 155, 960–963

[20] Rubenstein, C. (1981), “Money and self-esteem, relationships, secrecy, envy, satisfaction”, Psychology Today, Vol. 15 No. 5, pp. 29-44.

[21] Roberts, J.A. (1998), “Compulsive buying among college students: an investigation of its antecedents, consequences, and implications for public policy”, The Journal of Consumer Affairs, Vol. 32 No. 2, pp. 295-319.

[22] Lunt, P. K., & Livingstone, S. M. (1992). Mass consumption and personal identity. Buckingham: Open University Press

[23] Todd Weaver, George P Moschis, and Teresa Davis,

“Antecedents of Materialism and Compulsive Consumption: A life Course Study in Australia” Journal of Australian Marketing, 19(4), (Nov, 2011), 247-256.

[24] Goldman, Arieh and Johny K. Johansson (1978), "Determinants of Search for Lower Prices: An Empirical Assessment of the Economics of Information Theory,"Journal of Consumer Research, 5 (December), 176-186.

[25] Dittmar, H., Long, K., & Meek, R. (2004). Buying on the internet: Gender differences in online and conventional buying motivations. Sex Roles, 50, 423–444.

[26] Urbany, J. E., P. R. Dickson and R. Kalapuracal (1996): Price Search in the Retail Grocery Market. Journal of Marketing, 60 (April), 91–104

[27] Dittmar, H. (2000). The role of self-image in excessive buying. In A. Benson (Ed.), I shop, therefore I am: Compulsive buying and the search for self (pp. 105–132). London and New York: Aronson.

[28] Dittmar, H., Beattie, J., & Friese, S. (1995). Gender identity and material symbols: Objects and decision considerations in impulse purchases. Journal of Economic Psychology, 16, 491–511.

[28] Krueger DW (1988). On Compulsive Shopping and Spending: A Psychodynamic Inquiry. American J. Psychotherapy. 42(10):574-584.

[30] Kuzma JM, Black DW (2006). Compulsive shopping: When spending begins to consume the consumer. J. Fam. Pract., 5(7): 27-40

[31] Scherhorn, G. (1990). The compulsive trait in buying behaviour. Journal of Consumer Policy, 13, 33–51.

[32] Bayley, G., & Nancarrow, C. (1998). Impulsive Purchaseing: A qualatative exploration of the phenomenon. Qualitative Marketing Research, 1(2), 17-27

[33] Kecen, J.J., & Lee, J. A. (2002) The influence of culture on consumer impulsive buying behaviour. Journal of Consumer Psychology, 12(2), 163-176

[34] Damon J (1988). Shopaholics. Los Angeles, CA: Price Stem Sloan,Inc.

[35] Faber, R. J., & O’Guinn, T. C. (1992). A clinical screener for compulsive buying. Journal of Consumer Research, 19, 459–469.

[36] Valence, Gilles, Alain d'Astous, and Louis Fortier (1988), "Compulsive Buying: Concept and Measurement," Journal of Consumer Policy, 11, 419-433.

[37] McCracken, G. (1990). Culture and consumption. Indianapolis: Indiana University Press.

A Comparative Study of Compulsive Buying Behavior between Working and Non-Working Women

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 20126

[38] Dittmar, H. (2001). Impulse buying in ordinary and compulsive consumers. In J. Baron, G. Loomes, & E. Weber (Eds.), Conflict and Tradeoffs in Decision-Making (pp. 110–135). Cambridge: Cambridge University Press.

[39] Joireman, J., Kees, J., & Sprott, D. (2010). Concern with immediate consequences magnifies the impact of compulsive buying tendencies on college student’ credit card debt. Journal of Consumer Affairs, Vol. 44, No. 1, pp 155-178

[40] Schor, J.B. (1998). The overspent American. New York: Harper Perennial Publishing.

[41] Hirschman EC (1992). The Consciousness of Addiction: Toward a General Theory of Compulsive Consumption. J. Consumer. Res. 19 (9): 155-179.

[42] Kerin, R. A., S. W. Hertley, and Rudelius. 2011. Marketing, 10th ed. (McGraw-Hill Irwin, New York.

[43] Faber, R. (2000). A systematic investigation into compulsive buying. In A. Benson (Ed.), I shop, therefore, I am (pp. 27– 53). Northvale, NJ: Jason Aronson Inc.

[44] Dittmar, H. & Beattie, J. (1998). Impulsive and Excessive Buying Behaviour. In Taylor-Gooby, P. (ed.). Choice and Public Policy: The Limits to Welfare Markets. Great Britain: Macmillan Press, 123-144

[45] McElroy, S., Satlin, A., Pope Jr., H., Keck Jr., P., & Hudson, J. (1991). Treatment of compulsive shopping with antidepressants:A report of three cases. Annals of Clinical Psychiatry,3, 199–204.

A Comparative Study of Compulsive Buying Behavior between Working and Non-Working Women

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 7

Annexure I

Survey Instrument – I

1. Name: ___________________________________________________________

2. Age (Bold your response):

(i) < 25yrs

(ii) 25yrs to less than 35yrs

(iii) 35yrs to less than 45yrs

(iv) 45yrs to less than 55yrs

(v) 55 yrs and above

3. Education (Bold your response):

(i) Under Graduate

(ii) Graduate

(iii) Post Graduate

(iv) Doctorate

4. Income Per Annum – If earning (Bold your response):

(i) Below Rs 2,50,000

(ii) Between Rs 2,50,001 and Rs 3,50,000

(iii) Between Rs 3,50,001 and Rs 4,50,000

(iv) Between Rs 4,50,000 and Rs 5,00,000

(v) Above Rs 5,00,001

(vi) Nil

5. Occupation (Bold your response):

(i) Service

(ii) Self-Employed

(iii) Homemaker

A Comparative Study of Compulsive Buying Behavior between Working and Non-Working Women

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 20128

Survey Instrument – II

Please express the extent to which you agree or disagree with each of the following statements. Please place an X on the line that best indicates how you feel about each statement.

S No

1

2

3

4

5

6

7

8

9

10

11

Calculating your score:

• Each X that you placed corresponds to a number: 5 for “strongly agree”, 4 for “somewhat agree”, 3 for “neither agree nor disagree”, 2 for “somewhat disagree, and 1 for “strongly disagree.

• Add together the 11 numbers for your Xs to get your total scale score.

• Compulsive buyers tend to score 42.2 or higher.

12345

Statement Strongly disagree

Somewhat disagree

Neither agree nor disagree

Somewhat agree

Strongly agree

When I have money, I cannot help but spend part or all of it.

I am often impulsive in my buying behaviour.

For me, shopping is a way of facing the stress of my daily life and relaxing.

I sometimes feel that something inside pushed me to go shopping.

There are times when I have a strong urge to buy.

At times, I have felt somewhat guilty after buying a product, because it seemed unreasonable.

There are some things I buy that I do not show to anybody for fear of being perceived as irrational in my buying behaviour.

I often have an unexplainable urge, a sudden and spontaneous desire, to go and buy something.

As soon as I enter a shopping centre or mall, I have an irresistible urge to go into a shop and buy something.

I have often bought a product that I did not need, while knowing that I have very little money left.

I am a spendthrift.

A Comparative Study of Compulsive Buying Behavior between Working and Non-Working Women

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 9

Annexure I

Survey Instrument – I

1. Name: ___________________________________________________________

2. Age (Bold your response):

(i) < 25yrs

(ii) 25yrs to less than 35yrs

(iii) 35yrs to less than 45yrs

(iv) 45yrs to less than 55yrs

(v) 55 yrs and above

3. Education (Bold your response):

(i) Under Graduate

(ii) Graduate

(iii) Post Graduate

(iv) Doctorate

4. Income Per Annum – If earning (Bold your response):

(i) Below Rs 2,50,000

(ii) Between Rs 2,50,001 and Rs 3,50,000

(iii) Between Rs 3,50,001 and Rs 4,50,000

(iv) Between Rs 4,50,000 and Rs 5,00,000

(v) Above Rs 5,00,001

(vi) Nil

5. Occupation (Bold your response):

(i) Service

(ii) Self-Employed

(iii) Homemaker

A Comparative Study of Compulsive Buying Behavior between Working and Non-Working Women

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 20128

Survey Instrument – II

Please express the extent to which you agree or disagree with each of the following statements. Please place an X on the line that best indicates how you feel about each statement.

S No

1

2

3

4

5

6

7

8

9

10

11

Calculating your score:

• Each X that you placed corresponds to a number: 5 for “strongly agree”, 4 for “somewhat agree”, 3 for “neither agree nor disagree”, 2 for “somewhat disagree, and 1 for “strongly disagree.

• Add together the 11 numbers for your Xs to get your total scale score.

• Compulsive buyers tend to score 42.2 or higher.

12345

Statement Strongly disagree

Somewhat disagree

Neither agree nor disagree

Somewhat agree

Strongly agree

When I have money, I cannot help but spend part or all of it.

I am often impulsive in my buying behaviour.

For me, shopping is a way of facing the stress of my daily life and relaxing.

I sometimes feel that something inside pushed me to go shopping.

There are times when I have a strong urge to buy.

At times, I have felt somewhat guilty after buying a product, because it seemed unreasonable.

There are some things I buy that I do not show to anybody for fear of being perceived as irrational in my buying behaviour.

I often have an unexplainable urge, a sudden and spontaneous desire, to go and buy something.

As soon as I enter a shopping centre or mall, I have an irresistible urge to go into a shop and buy something.

I have often bought a product that I did not need, while knowing that I have very little money left.

I am a spendthrift.

A Comparative Study of Compulsive Buying Behavior between Working and Non-Working Women

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 9

ABSTRACT

Accounting standards are required to harmonize the diverse accounting policies and practices to

facilitate comparison of financial statements. In India, accounting standards are issued by the Institute of

Chartered Accountants of India (ICAI). So far, ICAI has issued 32 accounting standards. Every country has

its own accounting standards. This worked well till trade was confined to domestic country. Liberalization

made economies open to globe. This created the need to have uniform accounting standards for

comparison of financial statements. International Accounting Standards Committee (IASC) initially issued

International Standards which worked well for twenty-seven years. IASC was replaced by International

Accounting Standards Board (IASB). IASB issued International Financial Reporting Standards (IFRS) from

time to time. So far, IASB issued 9 IFRS Standards. The study aims to observe the differences in the

financial statements reporting under Indian Generally Accepted Accounting Principles (IGAAP) and IFRS.

For the purpose of the study, Noida Toll Bridge Company Ltd., a public listed company, incorporated in

India in 1996 was selected. It constructed and operates the Delhi-Noida Toll Bridge on a build, own,

operate and transfer (BOOT) basis. The study makes a close observation of both Income statement and

balance sheet and states the reasons for differences of financial aspects reported under both the

standards.

Key words: IGAAP, IFRS, IASC, IASB, Income Statement, Balance Sheet

1. Introduction

Accounting standards are required to harmonize the diverse accounting policies and practices to facilitate comparison of financial statements. In India, accounting standards are issued by the Institute of Chartered Accountants of India (ICAI). So far, ICAI has issued 32 accounting standards. These accounting standards are mandatory. The members of the institute need to examine whether the accounting standard is complied with in the presentation of financial statements covered by their audit. Every country has its own accounting standards. This worked well when trade was confined to domestic country. Liberalization made economies open to globe. This created the need to have uniform accounting standards for comparison of financial statements.

1.1 History and Development of International Accounting Standards

The move for international accounting standards dates back to 1967 when an international study group comprising of the Institute of Chartered Accountants of England & Wales, American Institute of Certified Public Accountants Standing Interpretation Committee was also established for clarification and guidance on issues relating to accounting standards (IASC) with the objective that the standards it releases has rapid acceptance and implementation world-wide. International Accounting Standard Committee (IASC) survived for twenty-seven years and issued forty-one standards.

IASC was replaced by International Accounting Standards Board (IASB). IASB stated that they would adopt the body

Global Accounting Convergence and Adoption of IFRS by

India: A Case Study

Dr. M. Jayasree*

* Assistant Professor, Hyderabad Business School, Gitam University, Hyderabad

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 201210

of standards issued by IASC which would continue to be designated as International Accounting Standards (IAS). Any new standards coming forth would be published in a series called International Financial Reporting Standards (IFRS). The first IFRS was published in June 2003 which is IFRS 1, First time Adoption of IFRS.

1.2 India and IFRS

Liberalization and globalization, being the cornerstones of Indian economic policies ever since the early 1990’s, created the need for effective corporate governance and accounting standards. India being a member of ISAC constituted Accounting Standards Boards (ASB) with a view to harmonize the diverse accounting policies and practices in India. So far, ASB has issued 32 accounting standards. While framing standards due consideration is given to the existing laws, customs, usage, and business environment prevailing in India. Indian companies report financial statements based on Generally Accepted Accounting Principles (IGAAP). But, ASB being a member of IASC has to integrate with IFRS to the extent possible, in light of conditions and practices prevailing in India.

1.3 Road Map for Convergence

The road map for convergence of IFRS for Indian companies as notified by the Ministry of Corporate Affairs is as follows.

ØPhase I – The companies in this phase include companies that are part of BSE, NSE, listed outside India and companies having net-worth of more than Rs. 1000 crores (whether listed or not). These

stcompanies have to converge by 1 April, 2011.ØPhase II – Companies having net-worth exceeding Rs.

500 crores but not more than Rs. 1000 crores and Insurance companies should report their financial

ststatements in IFRS from 1 April, 2013.ØPhase III – Listed companies not covered in the above

phases have to report their financial statement in IFRS stfrom 1 April, 2014.

ØBanking Companies Scheduled Commercial Banks (SCB), Urban Cooperative banks (UCB) with net-worth exceeding Rs. 300 crores and Non-Banking Financial Companies (NBFC) forming part of NSE and BSE and also NBFC’s with net-worth exceeding Rs. 1000 crores should report their financial statements in IFRS from

st1 April, 2013. Banking companies, UCB’s with net-worth exceeding Rs. 200 crores and NBFC’s whether listed or not with net-worth exceeding Rs. 500 crores but not exceeding Rs. 1000 crores have to report their

stfinancial statement in IFRS from 1 April, 2014.

1.4 IFRS till Date

Companies in this phase include companies that are part of BSE, NSE and those listed outside IndiaØIFRS 1: First-time Adoption of International Financial

Reporting Standards.ØIFRS 2 : Share-based PaymentØIFRS 3: Business CombinationsØIFRS 4: Insurance ContractsØIFRS 5: Non-current Assets held for sale and

Discounted OperationsØIFRS 6: Exploration for and Evaluation of Mineral

ResourcesØIFRS 7: Financial Instruments: DisclosuresØIFRS 8: Operating SegmentsØIFRS 9: Financial Instruments

1.5 IAS so far Adopted

The following IAS are so far adopted for IFRSØIAS 1: Presentation of Financial StatementsØIAS 2: InventoriesØIAS 7: Statement of Cash FlowsØIAS 8: Accounting Policies, Changes in Accounting

Estimates and ErrorsØIAS 10: Events after the Reporting PeriodØIAS 11: Construction ContractsØIAS 12: Income TaxesØIAS 16: Property Plant and EquipmentØIAS 17: LeasesØIAS 18: RevenueØIAS 19: Employee BenefitsØIAS 20: Accounting for Government Grants and

Disclosure of Government AssistanceØIAS 21: The Effect of Changes in Foreign Exchange

RatesØIAS 23: Borrowing CostsØIAS 24: Related Party DisclosuresØIAS 26: Accounting and Reporting by Retirement

Benefit PlansØIAS 27: Consolidated and Separate Financial

StatementsØIAS 28: Investments in AssociatesØIAS 29: Financial reporting in Hyperinflationary

EconomiesØIAS 31: Interests in Joint VenturesØIAS 32: Financial Instruments: PresentationØIAS 33: Earnings per ShareØIAS 34: Interim Financial ReportingØIAS 36: Impairment of Assets ØIAS 37: Provisions, Contingent Liabilities and

Contingent AssetsØIAS 38: Intangible Assets

Global Accounting Convergence and Adoption of IFRS by India: A Case Study

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 11

ABSTRACT

Accounting standards are required to harmonize the diverse accounting policies and practices to

facilitate comparison of financial statements. In India, accounting standards are issued by the Institute of

Chartered Accountants of India (ICAI). So far, ICAI has issued 32 accounting standards. Every country has

its own accounting standards. This worked well till trade was confined to domestic country. Liberalization

made economies open to globe. This created the need to have uniform accounting standards for

comparison of financial statements. International Accounting Standards Committee (IASC) initially issued

International Standards which worked well for twenty-seven years. IASC was replaced by International

Accounting Standards Board (IASB). IASB issued International Financial Reporting Standards (IFRS) from

time to time. So far, IASB issued 9 IFRS Standards. The study aims to observe the differences in the

financial statements reporting under Indian Generally Accepted Accounting Principles (IGAAP) and IFRS.

For the purpose of the study, Noida Toll Bridge Company Ltd., a public listed company, incorporated in

India in 1996 was selected. It constructed and operates the Delhi-Noida Toll Bridge on a build, own,

operate and transfer (BOOT) basis. The study makes a close observation of both Income statement and

balance sheet and states the reasons for differences of financial aspects reported under both the

standards.

Key words: IGAAP, IFRS, IASC, IASB, Income Statement, Balance Sheet

1. Introduction

Accounting standards are required to harmonize the diverse accounting policies and practices to facilitate comparison of financial statements. In India, accounting standards are issued by the Institute of Chartered Accountants of India (ICAI). So far, ICAI has issued 32 accounting standards. These accounting standards are mandatory. The members of the institute need to examine whether the accounting standard is complied with in the presentation of financial statements covered by their audit. Every country has its own accounting standards. This worked well when trade was confined to domestic country. Liberalization made economies open to globe. This created the need to have uniform accounting standards for comparison of financial statements.

1.1 History and Development of International Accounting Standards

The move for international accounting standards dates back to 1967 when an international study group comprising of the Institute of Chartered Accountants of England & Wales, American Institute of Certified Public Accountants Standing Interpretation Committee was also established for clarification and guidance on issues relating to accounting standards (IASC) with the objective that the standards it releases has rapid acceptance and implementation world-wide. International Accounting Standard Committee (IASC) survived for twenty-seven years and issued forty-one standards.

IASC was replaced by International Accounting Standards Board (IASB). IASB stated that they would adopt the body

Global Accounting Convergence and Adoption of IFRS by

India: A Case Study

Dr. M. Jayasree*

* Assistant Professor, Hyderabad Business School, Gitam University, Hyderabad

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 201210

of standards issued by IASC which would continue to be designated as International Accounting Standards (IAS). Any new standards coming forth would be published in a series called International Financial Reporting Standards (IFRS). The first IFRS was published in June 2003 which is IFRS 1, First time Adoption of IFRS.

1.2 India and IFRS

Liberalization and globalization, being the cornerstones of Indian economic policies ever since the early 1990’s, created the need for effective corporate governance and accounting standards. India being a member of ISAC constituted Accounting Standards Boards (ASB) with a view to harmonize the diverse accounting policies and practices in India. So far, ASB has issued 32 accounting standards. While framing standards due consideration is given to the existing laws, customs, usage, and business environment prevailing in India. Indian companies report financial statements based on Generally Accepted Accounting Principles (IGAAP). But, ASB being a member of IASC has to integrate with IFRS to the extent possible, in light of conditions and practices prevailing in India.

1.3 Road Map for Convergence

The road map for convergence of IFRS for Indian companies as notified by the Ministry of Corporate Affairs is as follows.

ØPhase I – The companies in this phase include companies that are part of BSE, NSE, listed outside India and companies having net-worth of more than Rs. 1000 crores (whether listed or not). These

stcompanies have to converge by 1 April, 2011.ØPhase II – Companies having net-worth exceeding Rs.

500 crores but not more than Rs. 1000 crores and Insurance companies should report their financial

ststatements in IFRS from 1 April, 2013.ØPhase III – Listed companies not covered in the above

phases have to report their financial statement in IFRS stfrom 1 April, 2014.

ØBanking Companies Scheduled Commercial Banks (SCB), Urban Cooperative banks (UCB) with net-worth exceeding Rs. 300 crores and Non-Banking Financial Companies (NBFC) forming part of NSE and BSE and also NBFC’s with net-worth exceeding Rs. 1000 crores should report their financial statements in IFRS from

st1 April, 2013. Banking companies, UCB’s with net-worth exceeding Rs. 200 crores and NBFC’s whether listed or not with net-worth exceeding Rs. 500 crores but not exceeding Rs. 1000 crores have to report their

stfinancial statement in IFRS from 1 April, 2014.

1.4 IFRS till Date

Companies in this phase include companies that are part of BSE, NSE and those listed outside IndiaØIFRS 1: First-time Adoption of International Financial

Reporting Standards.ØIFRS 2 : Share-based PaymentØIFRS 3: Business CombinationsØIFRS 4: Insurance ContractsØIFRS 5: Non-current Assets held for sale and

Discounted OperationsØIFRS 6: Exploration for and Evaluation of Mineral

ResourcesØIFRS 7: Financial Instruments: DisclosuresØIFRS 8: Operating SegmentsØIFRS 9: Financial Instruments

1.5 IAS so far Adopted

The following IAS are so far adopted for IFRSØIAS 1: Presentation of Financial StatementsØIAS 2: InventoriesØIAS 7: Statement of Cash FlowsØIAS 8: Accounting Policies, Changes in Accounting

Estimates and ErrorsØIAS 10: Events after the Reporting PeriodØIAS 11: Construction ContractsØIAS 12: Income TaxesØIAS 16: Property Plant and EquipmentØIAS 17: LeasesØIAS 18: RevenueØIAS 19: Employee BenefitsØIAS 20: Accounting for Government Grants and

Disclosure of Government AssistanceØIAS 21: The Effect of Changes in Foreign Exchange

RatesØIAS 23: Borrowing CostsØIAS 24: Related Party DisclosuresØIAS 26: Accounting and Reporting by Retirement

Benefit PlansØIAS 27: Consolidated and Separate Financial

StatementsØIAS 28: Investments in AssociatesØIAS 29: Financial reporting in Hyperinflationary

EconomiesØIAS 31: Interests in Joint VenturesØIAS 32: Financial Instruments: PresentationØIAS 33: Earnings per ShareØIAS 34: Interim Financial ReportingØIAS 36: Impairment of Assets ØIAS 37: Provisions, Contingent Liabilities and

Contingent AssetsØIAS 38: Intangible Assets

Global Accounting Convergence and Adoption of IFRS by India: A Case Study

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 11

ØIAS 39: Financial Instruments: Recognition and Measurement

ØIAS 40: Investment PropertyØIAS 41: Agriculture

1.6 Some Key Differences in IGAAP and IFRS

The convergence with IFRS has gained significant momentum in India. There are key differences between IGAAP and IFRS. Some of the key differences are outlined as follows:§Cost Vs Fair Value§Comprehensive Income Statement§Amortization of Intangibles§Impairment of Assets§Timing Difference and Temporary Differences§ESOPS§Property Plant & Equipment§Provisions§Financial Assets§Deferred Tax§Minority Interest§Business Combination

2. Review of Literature

Jean-Michel (2011) examined the information content of intangible assets under IFRS in comparison with local GAAP for European listed companies. In his observations the book value of intangible assets was higher under IFRS than local GAAP.

Tyrone M. Carlin (2010) made an attempt to understand the extent of compliance with the good will accounting and reporting disclosure requirements among a sample of goodwill intensive Australian firms over the first two years of IFRS Adoption.

Luzi Hail (2009) highlighted the impact of IFRS adoption on the quality and comparability of U.S regulatory and legal environment as well as the possible effects of IFRS adoption on the US economy as a whole. Pran Boolaky (2008) analyzed the level of harmonization with the IFRS by comparing the Madagadcar Accounting Plan 1987 and 2005 with the IFRS to identify any missing issues that was regarded as symptoms of disharmony. Da-Hsien Bao, (2010) studied the effect of the differences relating to reporting of inventory, property plant and equipment, intangible assets, and development costs under IFRS and USGAAP companies.

Ibarra, V., & Suez-Sales, M. (2011) made a comparison of International Financial Accounting Standards (IFRS) with Generally Accepted Accounting Principles (GAAP) for

small and medium-sized entities (SMEs). It touches in part convergence by the Financial Accounting Standard board (FASB) and International Accounting Standard Board (IASB) in bringing IFRS and GAAP to become one international set of standards. Countries will adopt IFRS in response to this global convergence. Asian countries have started compliance with these standards as early as June 2003 when first time adoption was issued by London International Accounting Standards Board (IASB). The paper presents the compliance of selected Asian countries such as China, India, Indonesia, Japan, Korea, Malaysia, Philippines, Singapore, Thailand, and Vietnam with the IFRS.

Smith, L. M., Limaye, A., Huang, Y. W., & Okafor, C. (2011) Observed that the world is increasingly global, in business operations and in accounting and financial reporting. Corporate accountants and internal auditors need a basic understanding of where they do business. The study provided a brief overview of three countries, including background information, accounting, and capital markets, which represent three major world regions: India in southeast Asia, Singapore in the Pacific Rim, and South Africa in Africa. The study focused on Accounting, IFRS, and capital markets in India, Singapore, and South Africa.

Rudra, T., & Bhattacharjee, C. A. D. (2012) focused on the issue of earnings management being a concern for the reliability of published accounting reports. Previous studies have shown that accounting standards add value to accounting information in the developed economy, but, remained silent about its benefits in the context of emerging economies. Although, researchers earlier classified India as one of the countries with high levels of earnings management in the world, there were very few studies on earnings management in India with no inferences on influences of accounting standards on earnings management. With this background, India, being an emerging market, providing a unique opportunity to examine whether adoption of international standards, is associated with reduced earnings management. The results of the study contradicted most of the previous findings based on developed countries by indicating that firms adopting international standards such as IFRS are more likely to have smooth earnings compared to non-adopting firms. These findings could prompt the regulators to think about the effectiveness of IFRS in reducing opportunistic earnings management in an emerging economy, like India, especially, when the Indian accounting standards are undergoing substantial changes with the convergence of IFRS in a phased manner.

Nikhil Chandra Shil (2009) focused on the issues and

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 201212

Global Accounting Convergence and Adoption of IFRS by India: A Case Study

challenges in harmonization of accounting standards through internationalization with Indian perspective. Dhar Satyajit (2009) identified that there was a great diversity in reporting of ESOP by Indian companies. The study concluded that this would change once IFRS is implemented.

Singh, S., and Nair, R. (2011) suggested a move that can help to solve corporate litigation with the tax departments and mark a step forward in India's commitment to implement International Financial Reporting Standards (IFRS) by reconciliation of Generally Accepted Accounting Principles (GAAP) and Tax Accounting Standards (TAS). TAS are separate accounting standards to be notified under Section 145 (2) of the Income Tax Act, 1969, by the Finance Ministry. The committee was asked to suggest accounting standards that need to be adopted under section 145 (2) of the Income Tax Act along with relevant modifications. It was asked to suggest amendments to the Act in view of transition to an IFRS regime. This was basically a recommendation by the Finance Ministry to resolve the problems associated with divergence of accounting standards and tax standards.

Dhar, Satyajit, and De, S. (2011) examined the impact on select financial performance indicators of Indian firms adopting employee stock option (ESO) schemes. The study attempted to enrich empirical research in the field and provides an insight into the potential contractual and valuation implication of the adoption of one of the IFRS set of standards on Indian firms and also provided contrary evidence of the role of growth characteristics in explaining the impact of expense recognition.

Bhattacharjee Sumon (2009) examined the prospects of IFRS adoption and their impact on the financial reporting environment of Bangladesh considering the underlying institutional and economic factors. Klimczak Marek Karol (2011) analyzed the effects of mandatory IFRS adoption in Poland and further examined the market reaction to new accounting standards.

The review of literature indicated the challenges and issues likely to be faced by adoption of IFRS. The present article examines the differences reported in the financial statements and states the reasons for such differences. Further, it brings out how Indian standards differ from IFRS relating to the aspects covered by the study.

3. Objectives of the Study

The objectives of the study arevTo examine the differences in the income statement

reported under IGAAP and IFRS.

vTo examine the differences in the Balance Sheet reported under IGAAP and IFRS

4. Methodology

For the purpose, financial statements of Noida Toll Bridge Company Ltd have been observed. The key differences in the income statement and balance sheet reported under IGAAP and IFRS have been carefully observed. The variation in the accounting standard and its effect on the difference in recognition and measurement is analyzed. The study covers three years’ financial statement, that is, from 2008-09 to 2010-11.

5. About Noida Toll Bridge Company Ltd

Noida Toll Bridge Company Ltd is a company set up to construct and operate the Delhi Noida Toll Bridge on a Build, Own, Operate and Transfer (BOOT) basis. The company is a public listed company incorporated in India in 1996. Noida Toll Bridge is an eight lane bridge which measures approximately 552.5 meters in length across the Yamuna River and includes the approach roads on the South Delhi side and Noida side. The company typically generates revenues through the levy of toll charges for the use of the bridge. On an average, there are 65000 vehicles plying daily on this bridge and this is estimated to be 200504 by the end of 2021.

6. Differences in Income Statement

The observation of the Income Statement of Noida Toll Bridge Company Ltd under both the standards identified the following differences. 1. Operating Expenses2. Amortization3. Finance Charges4. Deferred Tax Charge5. Current Tax6. Minority Interest

ØOperating Expenses – Provision for overlays was created on straight line basis while in IFRS provisions are created under IAS 37. Under straight line basis the costs/revenues are spread evenly through out the specific period without consideration to the Present obligation. For example, Provision for repairs Rs. 5,00,000 for five years will be spread evenly i.e. Rs. 1,00,000 for each year without reliable estimate of repairs for the current year and irrespective of the obligation. Where as under IAS 37. which deals with provisions, contingent liabilities and contingent assets, provision is recognized in the following conditions:– An entity has a present obligation as a result of a past event

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 13

Global Accounting Convergence and Adoption of IFRS by India: A Case Study

ØIAS 39: Financial Instruments: Recognition and Measurement

ØIAS 40: Investment PropertyØIAS 41: Agriculture

1.6 Some Key Differences in IGAAP and IFRS

The convergence with IFRS has gained significant momentum in India. There are key differences between IGAAP and IFRS. Some of the key differences are outlined as follows:§Cost Vs Fair Value§Comprehensive Income Statement§Amortization of Intangibles§Impairment of Assets§Timing Difference and Temporary Differences§ESOPS§Property Plant & Equipment§Provisions§Financial Assets§Deferred Tax§Minority Interest§Business Combination

2. Review of Literature

Jean-Michel (2011) examined the information content of intangible assets under IFRS in comparison with local GAAP for European listed companies. In his observations the book value of intangible assets was higher under IFRS than local GAAP.

Tyrone M. Carlin (2010) made an attempt to understand the extent of compliance with the good will accounting and reporting disclosure requirements among a sample of goodwill intensive Australian firms over the first two years of IFRS Adoption.

Luzi Hail (2009) highlighted the impact of IFRS adoption on the quality and comparability of U.S regulatory and legal environment as well as the possible effects of IFRS adoption on the US economy as a whole. Pran Boolaky (2008) analyzed the level of harmonization with the IFRS by comparing the Madagadcar Accounting Plan 1987 and 2005 with the IFRS to identify any missing issues that was regarded as symptoms of disharmony. Da-Hsien Bao, (2010) studied the effect of the differences relating to reporting of inventory, property plant and equipment, intangible assets, and development costs under IFRS and USGAAP companies.

Ibarra, V., & Suez-Sales, M. (2011) made a comparison of International Financial Accounting Standards (IFRS) with Generally Accepted Accounting Principles (GAAP) for

small and medium-sized entities (SMEs). It touches in part convergence by the Financial Accounting Standard board (FASB) and International Accounting Standard Board (IASB) in bringing IFRS and GAAP to become one international set of standards. Countries will adopt IFRS in response to this global convergence. Asian countries have started compliance with these standards as early as June 2003 when first time adoption was issued by London International Accounting Standards Board (IASB). The paper presents the compliance of selected Asian countries such as China, India, Indonesia, Japan, Korea, Malaysia, Philippines, Singapore, Thailand, and Vietnam with the IFRS.

Smith, L. M., Limaye, A., Huang, Y. W., & Okafor, C. (2011) Observed that the world is increasingly global, in business operations and in accounting and financial reporting. Corporate accountants and internal auditors need a basic understanding of where they do business. The study provided a brief overview of three countries, including background information, accounting, and capital markets, which represent three major world regions: India in southeast Asia, Singapore in the Pacific Rim, and South Africa in Africa. The study focused on Accounting, IFRS, and capital markets in India, Singapore, and South Africa.

Rudra, T., & Bhattacharjee, C. A. D. (2012) focused on the issue of earnings management being a concern for the reliability of published accounting reports. Previous studies have shown that accounting standards add value to accounting information in the developed economy, but, remained silent about its benefits in the context of emerging economies. Although, researchers earlier classified India as one of the countries with high levels of earnings management in the world, there were very few studies on earnings management in India with no inferences on influences of accounting standards on earnings management. With this background, India, being an emerging market, providing a unique opportunity to examine whether adoption of international standards, is associated with reduced earnings management. The results of the study contradicted most of the previous findings based on developed countries by indicating that firms adopting international standards such as IFRS are more likely to have smooth earnings compared to non-adopting firms. These findings could prompt the regulators to think about the effectiveness of IFRS in reducing opportunistic earnings management in an emerging economy, like India, especially, when the Indian accounting standards are undergoing substantial changes with the convergence of IFRS in a phased manner.

Nikhil Chandra Shil (2009) focused on the issues and

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 201212

Global Accounting Convergence and Adoption of IFRS by India: A Case Study

challenges in harmonization of accounting standards through internationalization with Indian perspective. Dhar Satyajit (2009) identified that there was a great diversity in reporting of ESOP by Indian companies. The study concluded that this would change once IFRS is implemented.

Singh, S., and Nair, R. (2011) suggested a move that can help to solve corporate litigation with the tax departments and mark a step forward in India's commitment to implement International Financial Reporting Standards (IFRS) by reconciliation of Generally Accepted Accounting Principles (GAAP) and Tax Accounting Standards (TAS). TAS are separate accounting standards to be notified under Section 145 (2) of the Income Tax Act, 1969, by the Finance Ministry. The committee was asked to suggest accounting standards that need to be adopted under section 145 (2) of the Income Tax Act along with relevant modifications. It was asked to suggest amendments to the Act in view of transition to an IFRS regime. This was basically a recommendation by the Finance Ministry to resolve the problems associated with divergence of accounting standards and tax standards.

Dhar, Satyajit, and De, S. (2011) examined the impact on select financial performance indicators of Indian firms adopting employee stock option (ESO) schemes. The study attempted to enrich empirical research in the field and provides an insight into the potential contractual and valuation implication of the adoption of one of the IFRS set of standards on Indian firms and also provided contrary evidence of the role of growth characteristics in explaining the impact of expense recognition.

Bhattacharjee Sumon (2009) examined the prospects of IFRS adoption and their impact on the financial reporting environment of Bangladesh considering the underlying institutional and economic factors. Klimczak Marek Karol (2011) analyzed the effects of mandatory IFRS adoption in Poland and further examined the market reaction to new accounting standards.

The review of literature indicated the challenges and issues likely to be faced by adoption of IFRS. The present article examines the differences reported in the financial statements and states the reasons for such differences. Further, it brings out how Indian standards differ from IFRS relating to the aspects covered by the study.

3. Objectives of the Study

The objectives of the study arevTo examine the differences in the income statement

reported under IGAAP and IFRS.

vTo examine the differences in the Balance Sheet reported under IGAAP and IFRS

4. Methodology

For the purpose, financial statements of Noida Toll Bridge Company Ltd have been observed. The key differences in the income statement and balance sheet reported under IGAAP and IFRS have been carefully observed. The variation in the accounting standard and its effect on the difference in recognition and measurement is analyzed. The study covers three years’ financial statement, that is, from 2008-09 to 2010-11.

5. About Noida Toll Bridge Company Ltd

Noida Toll Bridge Company Ltd is a company set up to construct and operate the Delhi Noida Toll Bridge on a Build, Own, Operate and Transfer (BOOT) basis. The company is a public listed company incorporated in India in 1996. Noida Toll Bridge is an eight lane bridge which measures approximately 552.5 meters in length across the Yamuna River and includes the approach roads on the South Delhi side and Noida side. The company typically generates revenues through the levy of toll charges for the use of the bridge. On an average, there are 65000 vehicles plying daily on this bridge and this is estimated to be 200504 by the end of 2021.

6. Differences in Income Statement

The observation of the Income Statement of Noida Toll Bridge Company Ltd under both the standards identified the following differences. 1. Operating Expenses2. Amortization3. Finance Charges4. Deferred Tax Charge5. Current Tax6. Minority Interest

ØOperating Expenses – Provision for overlays was created on straight line basis while in IFRS provisions are created under IAS 37. Under straight line basis the costs/revenues are spread evenly through out the specific period without consideration to the Present obligation. For example, Provision for repairs Rs. 5,00,000 for five years will be spread evenly i.e. Rs. 1,00,000 for each year without reliable estimate of repairs for the current year and irrespective of the obligation. Where as under IAS 37. which deals with provisions, contingent liabilities and contingent assets, provision is recognized in the following conditions:– An entity has a present obligation as a result of a past event

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 13

Global Accounting Convergence and Adoption of IFRS by India: A Case Study

– It is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and– A reliable estimate can be made of the amount of the obligation.

The amount of provision shall be the best estimate of the expenditure required to settle the present obligation at the end of the reporting period. In case of single obligation the most likely outcome may be the best estimate of the liability. Provision is an estimate if the entity considers different possible outcomes; the estimate would be based on expected value which is by weighing all possible outcomes by their associated probabilities.

Table 1: Showing Base Differences in Recognition of Operating Expenses using Indian GAAP and IFRS (in US$)The estimates of provisions under IGAAP and IFRS are different; therefore a gap has been identified in accounting of operating expenses. Table 1 shows that under IFRS operating expenses were higher by $ 627058 during 2008-09 and were lower by $21564 and $ 8949 during 2009-10 & 2010-11 respectively.

ØAmortization – Under IGAAP, intangibles have been amortized using the unit of usage method. IFRS requires residual values and useful life of intangibles to be reviewed at least at each annual reporting date, if the expected useful life of the asset is different from previous estimates and there is change in expected pattern of consumption of the future economic benefits embodied in the asset. The amortization method shall be changed to reflect the changed pattern. Such changes shall be accounted for as changes in accounting estimates in accordance with IAS 8. This requires reviewing the useful life and residual values which brought a difference of $ 41529, $ 43889 and $ 43225 (Refer Table 2) respectively for the years under observation. The amortization under IFRS was lower for all the three years than IGAAP. The same is depicted in the following table

Tabel 2: Showing Base differences in recognition of Amortization expenses using Indian GAAP and IFRS (In US $)

ØFinance Charges – interest under both the standards is calculated on accrual basis. However, under IGAAP there is no specific guidance for amortization of discount and premium. Tabel 3 shows that a difference of $1361989, $1825576 and $1198250 was observed. The financial charges are more under IFRS for all the three years. This can be observed from the following table.

Tabel 3: Showing Base differences in recognition of Finance Charges using Indian GAAP and IFRS (In US $)

ØDeferred Tax Charge – Under IGAAP deferred tax liability is recognized on timing difference where as IFRS recognizes on temporary differences. This resulted in a difference of $700604, $1237356 and $1094475 for 2008-09, 2009-10 and 2010-11. The deferred tax charges are higher in the case of IFRS. The following table indicates the same.

Tabel 4: Showing Base differences in recognition of Deferred Tax using Indian GAAP and IFRS (In US $)

The above table indicates that the difference first increases from 700604 (2008-09) to 1237356 (2009-10) and then decreases to 1094475 (2010-11)

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 201214

Year Indian GAAP IFRS Difference

2008-09 1028405 1655463 627058

2009-10 1104484 1082920 (21564)

2010-11 897653 888704 (8949)

Figures in brackets indicate lower than IGAAP.

Year IGAAP IFRS Difference

2008-09 651407 609878 (41529)

2009-10 688443 644554 (43889)

2010-11 678023 634798 (43225)

Year IGAAP IFRS Difference

2008-09 3248930 4610919 1361989

2009-10 3623134 5448710 1825576

2010-11 3795366 4993616 1198250

ØCurrent Tax – Under IGAAP, MAT credit has been separately presented while in IFRS, the same has been reclassified as deferred tax asset in accordance with IAS -12 income taxes.

Table 5: Showing Base differences in recognition of Current Tax using Indian GAAP and IFRS (In US $)In India companies prepare income statement as per provisions of Companies Act. But tax is payable on income computed as per the provisions of Income Tax Act. There are large number of companies which had profits as per

profit and loss account but were not paying tax as profits computed under income tax act are nil or negative. These companies were also paying dividends to shareholders. In order to bring such companies under tax bracket, section 115JA dealing with minimum alternate tax was introduced from 1997-98. The difference of tax paid under 115JA and other provisions of the act is treated as MAT credit. IGAAP does not recognize this as deferred tax asset and hence shown under loans and advances. This MAT credit can be set off against regular tax payable for subsequent five assessment years. In the year of set-off MAT credit (to the extent set-off) is credited to P&L A/c and the same is deducted from loans & advances. During 2010-11 the company claimed MAT credit; therefore a difference in current tax was noticed. (Refer Table 5) For other years the current tax was same under both the standards.

Minority Interest – Under IGAAP, losses attributable to non-controlling interest are adjusted against majority interest, while in IFRS such losses are attributed to non-controlling interest. Majority interest is shown in consolidated financial statement as per IAS 27.

Tabel 6: Showing Base differences in recognition of Minority Interest using Indian GAAP and IFRS (In US $)

Minority interest is non-controlling ownership of less than one half of the voting rights or no control over the composition of its board or other equivalent governing body. Under IGAAP the losses of minority interest are adjusted against majority interest (Controlling Interest), whereas under IFRS majority interest is shown in consolidated statement and non-controlling interest is shown separately in balance sheet (Refer Table 6).

ØDifference in Profit – The following table indicates the difference of profits noted under both the standards.

Tabel 7: Showing Base differences in Profits using Indian GAAP and IFRS (In US $)The analysis of the Table 7 shows that the profit for all the three years was less under IFRS. The reason for difference is recognition of the transactions under the standards.

7. Differences in Balance Sheet

The observation of the balance sheet of Noida Toll Bridge Company Ltd under both the standards identified the following differences in recognition and measurement.

1. Intangible Assets

2. Available for Sale financial assets

3. Interest Bearing Loans

4. Provisions

5. Deferred Tax Liability

6. Provisions under Current liabilities

7. General Reserve

Intangible Assets – Intangible Assets with only finite lifetime are only amortized under IFRS. Intangible assets with infinite life are not to be amortized. However, such intangibles are reviewed at least annually for impairment. Revaluations of other intangibles are done rarely. In case of IGAAP intangible once recognized is amortized. Revaluations are not permitted. The value of intangibles is less in the case of IFRS. The difference is $ 7268163, $ 8157581 and $ 8202979 for all the three years (Refer Table 8).

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 15

Year IGAAP IFRS Difference

2008-09 364399 1065003 700604

2009-10 1269866 2507222 1237356

2010-11 917576 2012051 1094475

Year IGAAP IFRS Difference

2008-09 5722 5722 -

2009-10 - - -

2010-11 - (3952) (3952)

Year IGAAP IFRS Difference

2008-09 987575 987575 -

2009-10 1450819 1450819 -

2010-11 217717 2038013 1820296

Year IGAAP IFRS Difference

2008-09 7297522 4649400 (2648122)

2009-10 5789049 2791570 (2997497)

2010-11 8217713 4156866 (4056895)

Global Accounting Convergence and Adoption of IFRS by India: A Case StudyGlobal Accounting Convergence and Adoption of IFRS by India: A Case Study

– It is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and– A reliable estimate can be made of the amount of the obligation.

The amount of provision shall be the best estimate of the expenditure required to settle the present obligation at the end of the reporting period. In case of single obligation the most likely outcome may be the best estimate of the liability. Provision is an estimate if the entity considers different possible outcomes; the estimate would be based on expected value which is by weighing all possible outcomes by their associated probabilities.

Table 1: Showing Base Differences in Recognition of Operating Expenses using Indian GAAP and IFRS (in US$)The estimates of provisions under IGAAP and IFRS are different; therefore a gap has been identified in accounting of operating expenses. Table 1 shows that under IFRS operating expenses were higher by $ 627058 during 2008-09 and were lower by $21564 and $ 8949 during 2009-10 & 2010-11 respectively.

ØAmortization – Under IGAAP, intangibles have been amortized using the unit of usage method. IFRS requires residual values and useful life of intangibles to be reviewed at least at each annual reporting date, if the expected useful life of the asset is different from previous estimates and there is change in expected pattern of consumption of the future economic benefits embodied in the asset. The amortization method shall be changed to reflect the changed pattern. Such changes shall be accounted for as changes in accounting estimates in accordance with IAS 8. This requires reviewing the useful life and residual values which brought a difference of $ 41529, $ 43889 and $ 43225 (Refer Table 2) respectively for the years under observation. The amortization under IFRS was lower for all the three years than IGAAP. The same is depicted in the following table

Tabel 2: Showing Base differences in recognition of Amortization expenses using Indian GAAP and IFRS (In US $)

ØFinance Charges – interest under both the standards is calculated on accrual basis. However, under IGAAP there is no specific guidance for amortization of discount and premium. Tabel 3 shows that a difference of $1361989, $1825576 and $1198250 was observed. The financial charges are more under IFRS for all the three years. This can be observed from the following table.

Tabel 3: Showing Base differences in recognition of Finance Charges using Indian GAAP and IFRS (In US $)

ØDeferred Tax Charge – Under IGAAP deferred tax liability is recognized on timing difference where as IFRS recognizes on temporary differences. This resulted in a difference of $700604, $1237356 and $1094475 for 2008-09, 2009-10 and 2010-11. The deferred tax charges are higher in the case of IFRS. The following table indicates the same.

Tabel 4: Showing Base differences in recognition of Deferred Tax using Indian GAAP and IFRS (In US $)

The above table indicates that the difference first increases from 700604 (2008-09) to 1237356 (2009-10) and then decreases to 1094475 (2010-11)

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 201214

Year Indian GAAP IFRS Difference

2008-09 1028405 1655463 627058

2009-10 1104484 1082920 (21564)

2010-11 897653 888704 (8949)

Figures in brackets indicate lower than IGAAP.

Year IGAAP IFRS Difference

2008-09 651407 609878 (41529)

2009-10 688443 644554 (43889)

2010-11 678023 634798 (43225)

Year IGAAP IFRS Difference

2008-09 3248930 4610919 1361989

2009-10 3623134 5448710 1825576

2010-11 3795366 4993616 1198250

ØCurrent Tax – Under IGAAP, MAT credit has been separately presented while in IFRS, the same has been reclassified as deferred tax asset in accordance with IAS -12 income taxes.

Table 5: Showing Base differences in recognition of Current Tax using Indian GAAP and IFRS (In US $)In India companies prepare income statement as per provisions of Companies Act. But tax is payable on income computed as per the provisions of Income Tax Act. There are large number of companies which had profits as per

profit and loss account but were not paying tax as profits computed under income tax act are nil or negative. These companies were also paying dividends to shareholders. In order to bring such companies under tax bracket, section 115JA dealing with minimum alternate tax was introduced from 1997-98. The difference of tax paid under 115JA and other provisions of the act is treated as MAT credit. IGAAP does not recognize this as deferred tax asset and hence shown under loans and advances. This MAT credit can be set off against regular tax payable for subsequent five assessment years. In the year of set-off MAT credit (to the extent set-off) is credited to P&L A/c and the same is deducted from loans & advances. During 2010-11 the company claimed MAT credit; therefore a difference in current tax was noticed. (Refer Table 5) For other years the current tax was same under both the standards.

Minority Interest – Under IGAAP, losses attributable to non-controlling interest are adjusted against majority interest, while in IFRS such losses are attributed to non-controlling interest. Majority interest is shown in consolidated financial statement as per IAS 27.

Tabel 6: Showing Base differences in recognition of Minority Interest using Indian GAAP and IFRS (In US $)

Minority interest is non-controlling ownership of less than one half of the voting rights or no control over the composition of its board or other equivalent governing body. Under IGAAP the losses of minority interest are adjusted against majority interest (Controlling Interest), whereas under IFRS majority interest is shown in consolidated statement and non-controlling interest is shown separately in balance sheet (Refer Table 6).

ØDifference in Profit – The following table indicates the difference of profits noted under both the standards.

Tabel 7: Showing Base differences in Profits using Indian GAAP and IFRS (In US $)The analysis of the Table 7 shows that the profit for all the three years was less under IFRS. The reason for difference is recognition of the transactions under the standards.

7. Differences in Balance Sheet

The observation of the balance sheet of Noida Toll Bridge Company Ltd under both the standards identified the following differences in recognition and measurement.

1. Intangible Assets

2. Available for Sale financial assets

3. Interest Bearing Loans

4. Provisions

5. Deferred Tax Liability

6. Provisions under Current liabilities

7. General Reserve

Intangible Assets – Intangible Assets with only finite lifetime are only amortized under IFRS. Intangible assets with infinite life are not to be amortized. However, such intangibles are reviewed at least annually for impairment. Revaluations of other intangibles are done rarely. In case of IGAAP intangible once recognized is amortized. Revaluations are not permitted. The value of intangibles is less in the case of IFRS. The difference is $ 7268163, $ 8157581 and $ 8202979 for all the three years (Refer Table 8).

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 15

Year IGAAP IFRS Difference

2008-09 364399 1065003 700604

2009-10 1269866 2507222 1237356

2010-11 917576 2012051 1094475

Year IGAAP IFRS Difference

2008-09 5722 5722 -

2009-10 - - -

2010-11 - (3952) (3952)

Year IGAAP IFRS Difference

2008-09 987575 987575 -

2009-10 1450819 1450819 -

2010-11 217717 2038013 1820296

Year IGAAP IFRS Difference

2008-09 7297522 4649400 (2648122)

2009-10 5789049 2791570 (2997497)

2010-11 8217713 4156866 (4056895)

Global Accounting Convergence and Adoption of IFRS by India: A Case StudyGlobal Accounting Convergence and Adoption of IFRS by India: A Case Study

Tabel 8: Showing Base differences in recognition and measurement of Intangible Assets under Indian GAAP and IFRS (In US $)

Available for Sale Financial Assets – Available for Sale Financial Assets are measured at cost Under IGAAP. IFRS requires such assets to be valued at fair value under IAS 39. Any gains or losses on subsequent measurement at fair value are recognized directly in equity. Fair value has been defined as the amount at which an asset could be exchanged, or liability settled, between knowledgeable, willing parties in an arm’s length transaction. The fair value would be viewed as exit price and not entry price. Since the fair value is not constant the value will be different from the cost price and hence there is a difference of asset value under the standards. The value of these assets is more in the case of IFRS. The IFRS value is higher by $ 776, $1131 and $ 8579 respectively for the years under observation (Refer Table 9).

Table 9: Showing Base differences in Available for Sale financial assets using Indian GAAP and IFRS (In US $)

Interest Bearing Loans – These are restated at amortized cost using the effective rate of interest method under IAS 39. Amortized cost = Amount at initial recognition – Principal repayments +/- Cumulative amortization Cumulative amortization is the difference of initial amount and maturity amount over the period using effective interest rate. Effective rate is the rate that exactly discounts estimated future cash payments through expected life. Under IGAAP there is no specific guidance for amortization of discount and premium, therefore there will be variation in the value of interest bearing loans. The interest bearing loans are less under IFRS when compared to IGAAP by $3120607, $1052399 and $5144695 respectively for the years of observation (Refer Table 10).

Table 10: Showing Base differences in Interest Bearing Loans using Indian GAAP and IFRS (In US $)

Provisions – Provisions for overlays are created under straight basis which are spread evenly as per IGAAP. Under IFRS provisions are created under IAS 37. The amount of provision shall be the best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The best estimate of the expenditure is the amount required to settle the present obligation at the end of the reporting period.

Table 11: Showing Base differences in Provisions using Indian GAAP and IFRS (In US $)

The observation of the above table shows that the provision is higher under IFRS by $ 28077 and $ 9036 for 2008-09 & 2009-10. During the year 2010-11 no difference was observed (Refer Table 11).

Deferred Tax Liability – Deferred Tax Liability under IGAAP is recognized on timing difference. A change which is permanent only is recognized. However, under IFRS deferred tax is recognized on temporary basis.

Tabel 12: Showing Base differences in Deferred Tax Liability using Indian GAAP and IFRS (In US $)

Deferred tax liabilities are the amount of income taxes payable in future periods in respect of taxable temporary differences. Temporary differences are differences

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 201216

Year Indian GAAP IFRS Difference

2008-09 114007709 106739516 (7268163)

2009-10 127958502 119800921 (8157581)

2010-11 128670605 120467626 (8202979)

Year IGAAP IFRS Difference

2008-09 38882287 35761680 (3120607)

2009-10 37438489 36386090 (1052399)

2010-11 31055569 25910874 (5144695)

Year IGAAP IFRS Difference

2008-09 3739149 3739925 776

2009-10 4965712 4966843 1131

2010-11 5321700 5330279 8579

between the carrying amount of an asset in the statement of financial position and its tax base. The analysis of the table indicates that deferred tax is higher under IFRS by $ 631301, $ 2012410 and $ 3151766 respectively (Refer Table 12).

Provisions under Current Liabilities – Provisions under Current liabilities included certain adjustments made under amalgamation scheme allowed under IGAAP but these are not in conformity with IFRS. The company created provision for prepayment of debts as per the scheme of amalgamation with DND Flyway Ltd. The values are low by $580115, $ 654782 and $ 766198 under IFRS for the years under observation (Refer Table 13).

Tabel 13: Showing Base differences in Provisions (Current) using Indian GAAP and IFRS (In US $)

General Reserve: Under IFRS stock options lapsed are transferred to general reserve. Under IGAAP options lapsed are accounted by making a reversal of compensation accounting. Therefore a balance of $9871, $11142 and $11264 as general reserve was noticed under IFRS for years under observation (Refer Table 14).

Table 14: Showing Base differences in General Reserve using Indian GAAP and IFRS (In US $)

8. Conclusion

The study observed that there were differences in Income Statement and Balance Sheet reported under IGAAP and IFRS of Noida Toll Bridge Company Ltd. The differences in Income statement were noticed in respect of Operating Expenses, Amortization, Finance Charges, Deferred Tax Charge, Current Tax, & Minority Interest. For operating expenses, the IFRS figures were higher for 2008-09 and lower for 2009-10 & 2010-11 when compared to IGAAP. The amortization losses reported under IFRS were lower

than IGAAP for all the years of comparison. The finance charges are higher under IFRS for all the years of study. The deferred tax charges are also higher under IFRS for all the years of observation. The current tax is the same under both the standards for 2008-09 & 2009-10 and the year 2010-11 observed a difference which is higher than the IGAAP. The minority interest was same under both the standards for the years 2008-09 & 2009-10. In the year 2010-11 the minority interest under IFRS was lower. The difference in the standard also reflected on the profits reported. The profits under IFRS were lower than IGAAP for all the years of study.

The observation of the balance sheet revealed differences in respect of Intangible Assets, Available for Sale financial assets, Interest Bearing Loans, Provisions, Deferred Tax Liability, Provisions under Current liabilities, and General Reserve. The intangible assets were lower under IFRS for all the years of study. Available for Sale financial assets value were higher under IFRS for all the years of observation. Interest Bearing Loans were lower under IFRS for all the three years. The provisions and deferred tax liability were both higher under IFRS for all the years of study. Provisions under current liabilities are lower under IFRS when compared to IGAAP. Finally, general reserve was higher under IFRS for all the years of study.

The differences in accounting policies bring about a difference in the financial standards. These differences contribute to changes in reporting system of financial statements. The study identified such changes in financial statements reported under both the standards and change in profitability and financial position resulting from change to IFRS.

9. References

1. Gosh T.P; IFRSs for Finance Executives, Taxmann Publications’ Pvt Ltd, Delhi, 2008.

2. Adukia S. Rajkumar, Encyclopedia on International Financial Reporting Standards, Snow White Publications, 1St Edition,Mumbai.

3. Taxmann; IFRS, Taxmann Publications’ Pvt Ltd, Delhi, 2007

4. Wild John; Financial Accounting with IFRS, Tata McGraw-Hill, 5th Edition, Delhi

5. Amstrong. S. Christopher; Barth E. Mary; Jagolinzer D. Alan; Riedl J. Edward (2008),Market Reaction to the Adoption IFRS in Europe; Working Paper No. 90-032, University of Pennsylvania, Harvard Business School and Stanford University.

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 17

Year IGAAP IFRS Difference

2008-09 1641956 1670033 28077

2009-10 2121380 2130416 9036

2010-11 104230 104230 -

Year IGAAP IFRS Difference

2008-09 1201797 621682 (580115)

2009-10 1275469 620687 (654782)

2010-11 3845017 3078819 (766198)

Year IGAAP IFRS Difference

2008-09 - 9871 9871

2009-10 - 11142 11142

2010-11 - 11264 11264

Year IGAAP IFRS Difference

2008-09 328352 959653 631301

2009-10 1704621 37177031 2012410

2010-11 2660016 5811782 3151766

Global Accounting Convergence and Adoption of IFRS by India: A Case StudyGlobal Accounting Convergence and Adoption of IFRS by India: A Case Study

Tabel 8: Showing Base differences in recognition and measurement of Intangible Assets under Indian GAAP and IFRS (In US $)

Available for Sale Financial Assets – Available for Sale Financial Assets are measured at cost Under IGAAP. IFRS requires such assets to be valued at fair value under IAS 39. Any gains or losses on subsequent measurement at fair value are recognized directly in equity. Fair value has been defined as the amount at which an asset could be exchanged, or liability settled, between knowledgeable, willing parties in an arm’s length transaction. The fair value would be viewed as exit price and not entry price. Since the fair value is not constant the value will be different from the cost price and hence there is a difference of asset value under the standards. The value of these assets is more in the case of IFRS. The IFRS value is higher by $ 776, $1131 and $ 8579 respectively for the years under observation (Refer Table 9).

Table 9: Showing Base differences in Available for Sale financial assets using Indian GAAP and IFRS (In US $)

Interest Bearing Loans – These are restated at amortized cost using the effective rate of interest method under IAS 39. Amortized cost = Amount at initial recognition – Principal repayments +/- Cumulative amortization Cumulative amortization is the difference of initial amount and maturity amount over the period using effective interest rate. Effective rate is the rate that exactly discounts estimated future cash payments through expected life. Under IGAAP there is no specific guidance for amortization of discount and premium, therefore there will be variation in the value of interest bearing loans. The interest bearing loans are less under IFRS when compared to IGAAP by $3120607, $1052399 and $5144695 respectively for the years of observation (Refer Table 10).

Table 10: Showing Base differences in Interest Bearing Loans using Indian GAAP and IFRS (In US $)

Provisions – Provisions for overlays are created under straight basis which are spread evenly as per IGAAP. Under IFRS provisions are created under IAS 37. The amount of provision shall be the best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The best estimate of the expenditure is the amount required to settle the present obligation at the end of the reporting period.

Table 11: Showing Base differences in Provisions using Indian GAAP and IFRS (In US $)

The observation of the above table shows that the provision is higher under IFRS by $ 28077 and $ 9036 for 2008-09 & 2009-10. During the year 2010-11 no difference was observed (Refer Table 11).

Deferred Tax Liability – Deferred Tax Liability under IGAAP is recognized on timing difference. A change which is permanent only is recognized. However, under IFRS deferred tax is recognized on temporary basis.

Tabel 12: Showing Base differences in Deferred Tax Liability using Indian GAAP and IFRS (In US $)

Deferred tax liabilities are the amount of income taxes payable in future periods in respect of taxable temporary differences. Temporary differences are differences

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 201216

Year Indian GAAP IFRS Difference

2008-09 114007709 106739516 (7268163)

2009-10 127958502 119800921 (8157581)

2010-11 128670605 120467626 (8202979)

Year IGAAP IFRS Difference

2008-09 38882287 35761680 (3120607)

2009-10 37438489 36386090 (1052399)

2010-11 31055569 25910874 (5144695)

Year IGAAP IFRS Difference

2008-09 3739149 3739925 776

2009-10 4965712 4966843 1131

2010-11 5321700 5330279 8579

between the carrying amount of an asset in the statement of financial position and its tax base. The analysis of the table indicates that deferred tax is higher under IFRS by $ 631301, $ 2012410 and $ 3151766 respectively (Refer Table 12).

Provisions under Current Liabilities – Provisions under Current liabilities included certain adjustments made under amalgamation scheme allowed under IGAAP but these are not in conformity with IFRS. The company created provision for prepayment of debts as per the scheme of amalgamation with DND Flyway Ltd. The values are low by $580115, $ 654782 and $ 766198 under IFRS for the years under observation (Refer Table 13).

Tabel 13: Showing Base differences in Provisions (Current) using Indian GAAP and IFRS (In US $)

General Reserve: Under IFRS stock options lapsed are transferred to general reserve. Under IGAAP options lapsed are accounted by making a reversal of compensation accounting. Therefore a balance of $9871, $11142 and $11264 as general reserve was noticed under IFRS for years under observation (Refer Table 14).

Table 14: Showing Base differences in General Reserve using Indian GAAP and IFRS (In US $)

8. Conclusion

The study observed that there were differences in Income Statement and Balance Sheet reported under IGAAP and IFRS of Noida Toll Bridge Company Ltd. The differences in Income statement were noticed in respect of Operating Expenses, Amortization, Finance Charges, Deferred Tax Charge, Current Tax, & Minority Interest. For operating expenses, the IFRS figures were higher for 2008-09 and lower for 2009-10 & 2010-11 when compared to IGAAP. The amortization losses reported under IFRS were lower

than IGAAP for all the years of comparison. The finance charges are higher under IFRS for all the years of study. The deferred tax charges are also higher under IFRS for all the years of observation. The current tax is the same under both the standards for 2008-09 & 2009-10 and the year 2010-11 observed a difference which is higher than the IGAAP. The minority interest was same under both the standards for the years 2008-09 & 2009-10. In the year 2010-11 the minority interest under IFRS was lower. The difference in the standard also reflected on the profits reported. The profits under IFRS were lower than IGAAP for all the years of study.

The observation of the balance sheet revealed differences in respect of Intangible Assets, Available for Sale financial assets, Interest Bearing Loans, Provisions, Deferred Tax Liability, Provisions under Current liabilities, and General Reserve. The intangible assets were lower under IFRS for all the years of study. Available for Sale financial assets value were higher under IFRS for all the years of observation. Interest Bearing Loans were lower under IFRS for all the three years. The provisions and deferred tax liability were both higher under IFRS for all the years of study. Provisions under current liabilities are lower under IFRS when compared to IGAAP. Finally, general reserve was higher under IFRS for all the years of study.

The differences in accounting policies bring about a difference in the financial standards. These differences contribute to changes in reporting system of financial statements. The study identified such changes in financial statements reported under both the standards and change in profitability and financial position resulting from change to IFRS.

9. References

1. Gosh T.P; IFRSs for Finance Executives, Taxmann Publications’ Pvt Ltd, Delhi, 2008.

2. Adukia S. Rajkumar, Encyclopedia on International Financial Reporting Standards, Snow White Publications, 1St Edition,Mumbai.

3. Taxmann; IFRS, Taxmann Publications’ Pvt Ltd, Delhi, 2007

4. Wild John; Financial Accounting with IFRS, Tata McGraw-Hill, 5th Edition, Delhi

5. Amstrong. S. Christopher; Barth E. Mary; Jagolinzer D. Alan; Riedl J. Edward (2008),Market Reaction to the Adoption IFRS in Europe; Working Paper No. 90-032, University of Pennsylvania, Harvard Business School and Stanford University.

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 17

Year IGAAP IFRS Difference

2008-09 1641956 1670033 28077

2009-10 2121380 2130416 9036

2010-11 104230 104230 -

Year IGAAP IFRS Difference

2008-09 1201797 621682 (580115)

2009-10 1275469 620687 (654782)

2010-11 3845017 3078819 (766198)

Year IGAAP IFRS Difference

2008-09 - 9871 9871

2009-10 - 11142 11142

2010-11 - 11264 11264

Year IGAAP IFRS Difference

2008-09 328352 959653 631301

2009-10 1704621 37177031 2012410

2010-11 2660016 5811782 3151766

Global Accounting Convergence and Adoption of IFRS by India: A Case StudyGlobal Accounting Convergence and Adoption of IFRS by India: A Case Study

6. Ashbaugh Hollis; Pincus Morton; Domestic accounting Standards, International Accounting Standards and Predictability of Earnings (2001), Journal of Accounting Research, Vol.39, No.3, December, pp 417- 434.

7. Dhar Satyajit; De Subhabrate; ESOP Accounting in India (2009): Measurement & Disclosures Issues, Journal of Business & Economic Issues, Vol.1 No. 1, pp 26-42

8. IFRS: Developing a Road Map for Convergence, KPMG, March 2008.

9. Similarities and Differences: A Comparison of IFRS, USGAAP and Indian GAAP, (2006) PWC.

10. Shil Chandra Nikhil; Dr. Das Bhagaban; Pramanik Kumar Alok (2009); Harmonization of Accounting Standards through Internationalization, International Business Research, Vol.2 No. 2, April, pp 194-201

11. Da-Hsien Bao, Jooh Lee, George Romeo, (2010) "Comparisons on selected ratios between IFRS and US GAAP companies", Journal of Financial Reporting and Accounting, Vol. 8 Iss: 1, pp.22 – 34

12. Pran Boolaky, Kumba Jallow, (2008) "A historical analysis of the accounting development in Madagascar between 1900 to 2005: The journey from accounting plan to IFRS", Journal of Applied Accounting Research, Vol. 9 Iss: 2, pp.126 – 144

13. David Lont, (2002) "Unspecified Operating Expense Disclosure Requirements in New Zealand. Has FRS 9 Made a Difference?", Pacific Accounting Review, Vol. 14 Iss: 2, pp.57 – 99

14. Sahut -Michel Jean, Sandrine Boulerne, Fre´de´ric Teulon (2011) Do IFRS provide better information about intangibles in Europe? Review of Accounting and Finance Vol. 10 No. 3, pp. 267-290

15. Carlin M. Tyrone and Nigel Finch(2010), Resisting compliance with IFRS goodwill accounting and reporting disclosures Evidence from Australia, Journal of Accounting &Organizational Change Vol. 6 No. 2, pp. 260-280

16. Carlin M. Tyrone and Nigel Finch(2010), Resisting compliance with IFRS goodwill accounting and reporting disclosures Evidence from Australia, Journal of Accounting &Organizational Change Vol. 6 No. 2, pp. 260-280

17. Smith, L. M., Limaye, A., Huang, Y. W., & Okafor, C. (2011). Accounting, IFRS, and capital markets in India, Singapore, and South Africa. Internal Auditing, 26(4), 32-37. http://search.proquest.com/docview/892464209?accountid=58860

18. Singh, S. (2011, Jun 06). Changes in global accounting rules to affect Indian standards. McClatchy - Tribune Business News, pp. n/a. http://search.proquest.com/docview/870271041?accountid=58860

19. Dhar, S., & De, S. (2011). Stock option compensation. International Journal of Commerce & Management, 21(2), pp 122-142.

20. Rudra, T., & Bhattacharjee, C. A. D. (2012). Does IFRs influence earnings management? evidence from India. Journal of Management Research, 4(1), 1-13. http://search.proquest.com/docview/913132861?accountid=58860

21. http://www.fibv.com22. http://www.iasplus.com23. http://www.icai.org/resource/o_ac_standard.htm24. www.mca.gov.in25. www.investopedia.com

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 201218

ABSTRACT

The purpose of the study is to explore and present the factors influencing the Job Satisfaction amongst

Doctors working in various Government, Corporate and Private Hospitals. The paper examines the

descriptive components that bring in Job Satisfaction in a much elaborate form. The data has been

collected from about 118 Doctors working in Metropolitan Cities, District Head Quarters and Rural

Villages. The findings of the study present the factors underlying the Job Satisfaction, which will be the

source for various bodies to formulate the policies needed for sustainable and higher quality care and

ultimately the Job Satisfaction amongst Doctors.

Key words: Job Satisfaction, Doctors, India, Factors underlying Job Satisfaction

1. Introduction

Indian Ethos ‘read’ - “Vaidyo Narayano Hari”, a Sanskrit Phrase - means Doctor is God, whose primary responsibility includes saving the life of individuals, thus emphasizing the role of doctors in the wellbeing of Individuals’ existence.

A doctor is merely not to be confined to diagnosing and providing remedies to the medical needs but also to understand the emotions of the patients while treating them, as their emotions play a pivotal role on the intensity of health disorder. A satisfied doctor in profession is able to spend more time in understanding the emotions of the patients which may have a positive impact on the treatment.

Job satisfaction is negatively related to job turnover (Freeman, 1978; McEvoy and Cascio, 1985; Akerlof et al., 1988; Weiss, 1984), and absenteeism (Clegg, 1983), and positively related to productivity (Mangione and Quinn, 1975). Therefore, it is useful to understand which job characteristics and provisions increase job satisfaction.

Considering the importance of job satisfaction in medical profession, the study aims at identifying the factors underlying the job satisfaction.

2. Review of Literature:

Job satisfaction is generally conceived as an attitudinal variable that reflects the degree to which people like their jobs, and is positively related to employee health and job performance (Spector, 1997). For many physicians, job satisfaction hinges on good relationships with staff and colleagues, control of time off, adequate resources, and clinical autonomy (Williams et al., 2003).

Reliable measures of physician job satisfaction help explain physicians’ behavior in clinical, economic, and organizational domains, as well as re-engineering medical workplaces to better meet the needs of doctors and patients (Konrad et al., 1999). The consequences of dissatisfaction include increased physician turnover, decreased continuity of care for patients, increased cost of the medical system, and increased patient dissatisfaction (Murray, 2000).

Landon (2004) found that threats to physicians’ ability to manage their day-to-day patient interactions and their time, as well as their ability to provide high-quality care, are most strongly associated with changes in career satisfaction. Stoddard et al. (2001) reported that the level of income and clinical autonomy are related to physician satisfaction. Rondeau and Francescutti (2005) found that institutional resource constraints are major contributors to

A Study of Job Satisfaction Among Doctors Working in Government and Private Hospitals in the State of Andhra Pradesh

Dr Ramesh Kumar Miryala*Shailaja Thangella**

* Professor, Swami Ramananda Tirtha Institute of Science & Technology, Nalgonda

** Assistant Professor, Swami Ramananda Tirtha Institute of Science & Technology, Nalgonda

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 19

Global Accounting Convergence and Adoption of IFRS by India: A Case Study

6. Ashbaugh Hollis; Pincus Morton; Domestic accounting Standards, International Accounting Standards and Predictability of Earnings (2001), Journal of Accounting Research, Vol.39, No.3, December, pp 417- 434.

7. Dhar Satyajit; De Subhabrate; ESOP Accounting in India (2009): Measurement & Disclosures Issues, Journal of Business & Economic Issues, Vol.1 No. 1, pp 26-42

8. IFRS: Developing a Road Map for Convergence, KPMG, March 2008.

9. Similarities and Differences: A Comparison of IFRS, USGAAP and Indian GAAP, (2006) PWC.

10. Shil Chandra Nikhil; Dr. Das Bhagaban; Pramanik Kumar Alok (2009); Harmonization of Accounting Standards through Internationalization, International Business Research, Vol.2 No. 2, April, pp 194-201

11. Da-Hsien Bao, Jooh Lee, George Romeo, (2010) "Comparisons on selected ratios between IFRS and US GAAP companies", Journal of Financial Reporting and Accounting, Vol. 8 Iss: 1, pp.22 – 34

12. Pran Boolaky, Kumba Jallow, (2008) "A historical analysis of the accounting development in Madagascar between 1900 to 2005: The journey from accounting plan to IFRS", Journal of Applied Accounting Research, Vol. 9 Iss: 2, pp.126 – 144

13. David Lont, (2002) "Unspecified Operating Expense Disclosure Requirements in New Zealand. Has FRS 9 Made a Difference?", Pacific Accounting Review, Vol. 14 Iss: 2, pp.57 – 99

14. Sahut -Michel Jean, Sandrine Boulerne, Fre´de´ric Teulon (2011) Do IFRS provide better information about intangibles in Europe? Review of Accounting and Finance Vol. 10 No. 3, pp. 267-290

15. Carlin M. Tyrone and Nigel Finch(2010), Resisting compliance with IFRS goodwill accounting and reporting disclosures Evidence from Australia, Journal of Accounting &Organizational Change Vol. 6 No. 2, pp. 260-280

16. Carlin M. Tyrone and Nigel Finch(2010), Resisting compliance with IFRS goodwill accounting and reporting disclosures Evidence from Australia, Journal of Accounting &Organizational Change Vol. 6 No. 2, pp. 260-280

17. Smith, L. M., Limaye, A., Huang, Y. W., & Okafor, C. (2011). Accounting, IFRS, and capital markets in India, Singapore, and South Africa. Internal Auditing, 26(4), 32-37. http://search.proquest.com/docview/892464209?accountid=58860

18. Singh, S. (2011, Jun 06). Changes in global accounting rules to affect Indian standards. McClatchy - Tribune Business News, pp. n/a. http://search.proquest.com/docview/870271041?accountid=58860

19. Dhar, S., & De, S. (2011). Stock option compensation. International Journal of Commerce & Management, 21(2), pp 122-142.

20. Rudra, T., & Bhattacharjee, C. A. D. (2012). Does IFRs influence earnings management? evidence from India. Journal of Management Research, 4(1), 1-13. http://search.proquest.com/docview/913132861?accountid=58860

21. http://www.fibv.com22. http://www.iasplus.com23. http://www.icai.org/resource/o_ac_standard.htm24. www.mca.gov.in25. www.investopedia.com

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 201218

ABSTRACT

The purpose of the study is to explore and present the factors influencing the Job Satisfaction amongst

Doctors working in various Government, Corporate and Private Hospitals. The paper examines the

descriptive components that bring in Job Satisfaction in a much elaborate form. The data has been

collected from about 118 Doctors working in Metropolitan Cities, District Head Quarters and Rural

Villages. The findings of the study present the factors underlying the Job Satisfaction, which will be the

source for various bodies to formulate the policies needed for sustainable and higher quality care and

ultimately the Job Satisfaction amongst Doctors.

Key words: Job Satisfaction, Doctors, India, Factors underlying Job Satisfaction

1. Introduction

Indian Ethos ‘read’ - “Vaidyo Narayano Hari”, a Sanskrit Phrase - means Doctor is God, whose primary responsibility includes saving the life of individuals, thus emphasizing the role of doctors in the wellbeing of Individuals’ existence.

A doctor is merely not to be confined to diagnosing and providing remedies to the medical needs but also to understand the emotions of the patients while treating them, as their emotions play a pivotal role on the intensity of health disorder. A satisfied doctor in profession is able to spend more time in understanding the emotions of the patients which may have a positive impact on the treatment.

Job satisfaction is negatively related to job turnover (Freeman, 1978; McEvoy and Cascio, 1985; Akerlof et al., 1988; Weiss, 1984), and absenteeism (Clegg, 1983), and positively related to productivity (Mangione and Quinn, 1975). Therefore, it is useful to understand which job characteristics and provisions increase job satisfaction.

Considering the importance of job satisfaction in medical profession, the study aims at identifying the factors underlying the job satisfaction.

2. Review of Literature:

Job satisfaction is generally conceived as an attitudinal variable that reflects the degree to which people like their jobs, and is positively related to employee health and job performance (Spector, 1997). For many physicians, job satisfaction hinges on good relationships with staff and colleagues, control of time off, adequate resources, and clinical autonomy (Williams et al., 2003).

Reliable measures of physician job satisfaction help explain physicians’ behavior in clinical, economic, and organizational domains, as well as re-engineering medical workplaces to better meet the needs of doctors and patients (Konrad et al., 1999). The consequences of dissatisfaction include increased physician turnover, decreased continuity of care for patients, increased cost of the medical system, and increased patient dissatisfaction (Murray, 2000).

Landon (2004) found that threats to physicians’ ability to manage their day-to-day patient interactions and their time, as well as their ability to provide high-quality care, are most strongly associated with changes in career satisfaction. Stoddard et al. (2001) reported that the level of income and clinical autonomy are related to physician satisfaction. Rondeau and Francescutti (2005) found that institutional resource constraints are major contributors to

A Study of Job Satisfaction Among Doctors Working in Government and Private Hospitals in the State of Andhra Pradesh

Dr Ramesh Kumar Miryala*Shailaja Thangella**

* Professor, Swami Ramananda Tirtha Institute of Science & Technology, Nalgonda

** Assistant Professor, Swami Ramananda Tirtha Institute of Science & Technology, Nalgonda

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 19

Global Accounting Convergence and Adoption of IFRS by India: A Case Study

emergency physician job dissatisfaction. The most significant resource factors were availability of emergency room physicians, access to hospital technology and emergency beds, and stability of financial (investment) resources.

Grunfeld et al. (2005) note that the greatest source of job satisfaction amongst Canadian oncology physicians stemmed from patient care and contact, while increasing workloads emerged as major sources of job stress. A Japanese survey of some 4,896 doctors working for public clinics or hospitals found that continuing medical education and interactions with municipal governments were rated as least satisfactory (Masatoshi et al., 2004).

There is growing evidence from many countries that health professionals have become de-motivated, with growing rates of burn-out reflecting a failure of working conditions to keep pace with the increasing complexity of their work (Dubois et al., 2006).

In a survey of over 1,000 Swiss physicians, Bovier and Perneger (2003) found that patient care, professional relations, intellectual stimulation, and opportunities for continuing medical education were strong predictors of satisfaction while workload, time available for family, friends or leisure, administrative burden, and work-related income and prestige were predictors of dissatisfaction.

3. Methodology:

Although physicians’ job satisfaction is a multidimensional construct (Nixon and Jaramillo, 2003) the facets generally accessed in research include rewards, people, nature of work, and organizational context (Spector, 1997). The main theoretical framework underlying this study is the concept of job characteristics developed by Hackman and Oldham (1976, 1980). The model relates skill variety, task significance, feedback, autonomy, and friendship opportunities with both affective and behavioral job outcomes. A meta-analysis by Loher et al. (1985) shows a positive relationship between job characteristics and job satisfaction while a meta-analysis of 312 samples by Bono et al. (2001) estimated a mean correlation between overall job satisfaction and job performance to be 0.30.

The instrument used in this study was adapted from the scale called Global Job Satisfaction developed by Warr, Cook and Wall (1979). The global job satisfaction scale (Warr et al. 1979) has been earlier demonstrated to have a high degree of reliability (Fields, 2002). The coefficient alpha for this scale was (a = 0.91) indicating high reliability.

The survey method is used for collecting primary data using an instrument specified in above section; along with that secondary data, sourcing from research publications is majorly used only to conceptualize the concept of Job Satisfaction and to devise an instrument to measure it; all such secondary resources used are properly cited. A sample size of 118 physicians working with Government, Corporate and Own Hospitals are chosen from different Cities, Towns and Rural places of State of Andhra Pradesh, India. The non-probabilistic sampling methods like convenience and judgment are employed in choosing the places and the kind of hospital. A proper care is taken to see to it that there was right representation of varied demographics. These varied subjects are chosen to comprehend the reasons underling the Job Satisfaction.

Access to physicians was primarily through their administrators who were thoroughly briefed on the background of the study, the aims of the research, and the need for confidentiality. Participation was purely voluntary and physicians were under no pressure to participate. In some cases, the process of gathering the surveys was entrusted to heads of departments. In others, surveys were distributed at administrative gatherings, and completed surveys were left in a container. In no instance did subjects return their survey to their supervisors or head of department directly.The collected data through the questionnaire is properly codified and entered in SPSS 17.0 package and using SPSS, descriptive analysis is done and reliability of data is tested and then the factor analysis is done to extract the factors underlying the Job Satisfaction.

4. Data Analysis:

The primary data collected has been analyzed and the results are presented under the following three heads:§Respondents Profile§Descriptive Statistics and Correlation Matrix§Factors Identified

Respondents Profile:

The profile of the respondents with respect to their Gender, Marital Status, Nature of Organization, Age, Years of Experience, Qualification, Designation, Salary, No. of Family dependents is presented in the Appendix A (Table A1). The profile of the respondents constitutes approximately equal gender ratio, dominated by married class (96.6%), head chunk working with Government Hospitals (89.8%), and more than 57.6% belonging to 45 years to 60 years. The most of the respondents (78%) are with MS qualification and about 67.8% having family dependents between 2 to 4 in number.

A Study of Job Satisfaction Among Doctors Working in Government and Private Hospitals in the State of Andhra Pradesh

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A Study of Job Satisfaction Among Doctors Working in Government and Private Hospitals in the State of Andhra Pradesh

Descriptive Statistics and Correlation Matrix

The descriptive statistics table in the Appendix A (Table A2) includes the mode, mean and standard deviation of the raw score of each of the variable as given by the respondents. The mean values for the thirty four variables (on scale of 1 to 7: 1 = extremely satisfied to 7= extremely dissatisfied and 4= neutral response) ranged from 2.54 to 4.86 and the standard deviation ranged from 1.015 to 1.749. The correlation matrix reveals the degree of pair-wise relationship of the variables some of the correlation coefficients were found to be negative and some positive.

For descriptive ‘Recreation facilities in combating with Strain’, the both mode and mean are found to be highest (Mode = 6 and mean = 4.86) with above average standard deviation.

Factors Identified:

The responses to various aspects related to Job Satisfaction are subjected to factor analysis by principal components using SPSS. The primary goal had been to obtain factors each of which would explain the Job Satisfaction among Doctors working in Government and Private Hospitals. The following statistics are generated and used for the purpose of this study:

i. Communalitiesii. Kaiser-Meyer-Olkin Measure of Sampling

Adequacy & Bartlett's Test of Sphericityiii. Eigen Value and Scree plot; andiv. Component Matrix and Rotated component matrix

4.1 Communalities:

In factor analysis, there are various factors which are referred to as ‘common factors’, each of which loads on variables and other factors which are extraneous to each of the variables. The proportion of variance of a variable explained by the common factor is called the Communality. The Communality of the variable ranges between 0 and 1, where 0 indicates that the common factors explain none of the variance and 1 indicates that all the variance is explained by the common factors. The extracted communalities are estimates of the variance in each variable accounted for by the components are presented in the Appendix B (Table B1). The Communalities are all above mediocre, ranging from 0.590 to 0.875.

4.2 Kaiser-Meyer-Olkin Measure of Sampling Adequacy & Bartlett's Test of Sphericity:

From the Table B2 of Appendix B – the value of Kaiser-Meyer-Olkin Measure of Sampling Adequacy (KMO) is 0.684, which falls in to the range of being higher mediocre (i.e., between 0.5 to 0.7 as mediocre and 0.7 to 0.9 as higher mediocre); so we should be confident that factor analysis is appropriate for these data.

From the Table B2 in Appendix B – the Bartlett's measure is found to be highly significant as the value p<0.001, and therefore factor analysis is appropriate.

4.3 Eigen Value and Scree plot

Eigen values represent the amount of standardized variance that has been captured by each of the components. The first component accounts for the largest possible amount of variance. Table B3 in Appendix B represents the Initial Extraction using Principal Component Analysis method suppressing the components with values less than 0.3 and graph represents the corresponding Scree Plot in Appendix B.

The Scree plot in Appendix B helps in determining the optimal number of components. The Eigen value of each component in the initial solution is plotted. Generally the components on the steep slope are extracted. Based on Eigen values and Scree Plot Six Factors are extracted in this study.

4.4 Component Matrix and Rotated Component Matrix

The component matrix in the Appendix B (Table B4) presents the initial factor loadings. The factor loadings associated with a variable is the correlation between the factor and the standard score of the variable.

The component matrix is rotated by varimax for the purpose of establishing a high correlation between variables and factors and in determining what the factor represents.

Table B5 in Appendix B depicts the rotated component matrix and Table B6 in Appendix B presents Eigen values as well as the percentage of variance explained, it is noted that 68.2% of the variance is explained by the six components.

4.5 Factors Extracted and Their Loadings:

The six factors extracted are described and the factor loadings are outlined in Table 1.

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 21

emergency physician job dissatisfaction. The most significant resource factors were availability of emergency room physicians, access to hospital technology and emergency beds, and stability of financial (investment) resources.

Grunfeld et al. (2005) note that the greatest source of job satisfaction amongst Canadian oncology physicians stemmed from patient care and contact, while increasing workloads emerged as major sources of job stress. A Japanese survey of some 4,896 doctors working for public clinics or hospitals found that continuing medical education and interactions with municipal governments were rated as least satisfactory (Masatoshi et al., 2004).

There is growing evidence from many countries that health professionals have become de-motivated, with growing rates of burn-out reflecting a failure of working conditions to keep pace with the increasing complexity of their work (Dubois et al., 2006).

In a survey of over 1,000 Swiss physicians, Bovier and Perneger (2003) found that patient care, professional relations, intellectual stimulation, and opportunities for continuing medical education were strong predictors of satisfaction while workload, time available for family, friends or leisure, administrative burden, and work-related income and prestige were predictors of dissatisfaction.

3. Methodology:

Although physicians’ job satisfaction is a multidimensional construct (Nixon and Jaramillo, 2003) the facets generally accessed in research include rewards, people, nature of work, and organizational context (Spector, 1997). The main theoretical framework underlying this study is the concept of job characteristics developed by Hackman and Oldham (1976, 1980). The model relates skill variety, task significance, feedback, autonomy, and friendship opportunities with both affective and behavioral job outcomes. A meta-analysis by Loher et al. (1985) shows a positive relationship between job characteristics and job satisfaction while a meta-analysis of 312 samples by Bono et al. (2001) estimated a mean correlation between overall job satisfaction and job performance to be 0.30.

The instrument used in this study was adapted from the scale called Global Job Satisfaction developed by Warr, Cook and Wall (1979). The global job satisfaction scale (Warr et al. 1979) has been earlier demonstrated to have a high degree of reliability (Fields, 2002). The coefficient alpha for this scale was (a = 0.91) indicating high reliability.

The survey method is used for collecting primary data using an instrument specified in above section; along with that secondary data, sourcing from research publications is majorly used only to conceptualize the concept of Job Satisfaction and to devise an instrument to measure it; all such secondary resources used are properly cited. A sample size of 118 physicians working with Government, Corporate and Own Hospitals are chosen from different Cities, Towns and Rural places of State of Andhra Pradesh, India. The non-probabilistic sampling methods like convenience and judgment are employed in choosing the places and the kind of hospital. A proper care is taken to see to it that there was right representation of varied demographics. These varied subjects are chosen to comprehend the reasons underling the Job Satisfaction.

Access to physicians was primarily through their administrators who were thoroughly briefed on the background of the study, the aims of the research, and the need for confidentiality. Participation was purely voluntary and physicians were under no pressure to participate. In some cases, the process of gathering the surveys was entrusted to heads of departments. In others, surveys were distributed at administrative gatherings, and completed surveys were left in a container. In no instance did subjects return their survey to their supervisors or head of department directly.The collected data through the questionnaire is properly codified and entered in SPSS 17.0 package and using SPSS, descriptive analysis is done and reliability of data is tested and then the factor analysis is done to extract the factors underlying the Job Satisfaction.

4. Data Analysis:

The primary data collected has been analyzed and the results are presented under the following three heads:§Respondents Profile§Descriptive Statistics and Correlation Matrix§Factors Identified

Respondents Profile:

The profile of the respondents with respect to their Gender, Marital Status, Nature of Organization, Age, Years of Experience, Qualification, Designation, Salary, No. of Family dependents is presented in the Appendix A (Table A1). The profile of the respondents constitutes approximately equal gender ratio, dominated by married class (96.6%), head chunk working with Government Hospitals (89.8%), and more than 57.6% belonging to 45 years to 60 years. The most of the respondents (78%) are with MS qualification and about 67.8% having family dependents between 2 to 4 in number.

A Study of Job Satisfaction Among Doctors Working in Government and Private Hospitals in the State of Andhra Pradesh

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 201220

A Study of Job Satisfaction Among Doctors Working in Government and Private Hospitals in the State of Andhra Pradesh

Descriptive Statistics and Correlation Matrix

The descriptive statistics table in the Appendix A (Table A2) includes the mode, mean and standard deviation of the raw score of each of the variable as given by the respondents. The mean values for the thirty four variables (on scale of 1 to 7: 1 = extremely satisfied to 7= extremely dissatisfied and 4= neutral response) ranged from 2.54 to 4.86 and the standard deviation ranged from 1.015 to 1.749. The correlation matrix reveals the degree of pair-wise relationship of the variables some of the correlation coefficients were found to be negative and some positive.

For descriptive ‘Recreation facilities in combating with Strain’, the both mode and mean are found to be highest (Mode = 6 and mean = 4.86) with above average standard deviation.

Factors Identified:

The responses to various aspects related to Job Satisfaction are subjected to factor analysis by principal components using SPSS. The primary goal had been to obtain factors each of which would explain the Job Satisfaction among Doctors working in Government and Private Hospitals. The following statistics are generated and used for the purpose of this study:

i. Communalitiesii. Kaiser-Meyer-Olkin Measure of Sampling

Adequacy & Bartlett's Test of Sphericityiii. Eigen Value and Scree plot; andiv. Component Matrix and Rotated component matrix

4.1 Communalities:

In factor analysis, there are various factors which are referred to as ‘common factors’, each of which loads on variables and other factors which are extraneous to each of the variables. The proportion of variance of a variable explained by the common factor is called the Communality. The Communality of the variable ranges between 0 and 1, where 0 indicates that the common factors explain none of the variance and 1 indicates that all the variance is explained by the common factors. The extracted communalities are estimates of the variance in each variable accounted for by the components are presented in the Appendix B (Table B1). The Communalities are all above mediocre, ranging from 0.590 to 0.875.

4.2 Kaiser-Meyer-Olkin Measure of Sampling Adequacy & Bartlett's Test of Sphericity:

From the Table B2 of Appendix B – the value of Kaiser-Meyer-Olkin Measure of Sampling Adequacy (KMO) is 0.684, which falls in to the range of being higher mediocre (i.e., between 0.5 to 0.7 as mediocre and 0.7 to 0.9 as higher mediocre); so we should be confident that factor analysis is appropriate for these data.

From the Table B2 in Appendix B – the Bartlett's measure is found to be highly significant as the value p<0.001, and therefore factor analysis is appropriate.

4.3 Eigen Value and Scree plot

Eigen values represent the amount of standardized variance that has been captured by each of the components. The first component accounts for the largest possible amount of variance. Table B3 in Appendix B represents the Initial Extraction using Principal Component Analysis method suppressing the components with values less than 0.3 and graph represents the corresponding Scree Plot in Appendix B.

The Scree plot in Appendix B helps in determining the optimal number of components. The Eigen value of each component in the initial solution is plotted. Generally the components on the steep slope are extracted. Based on Eigen values and Scree Plot Six Factors are extracted in this study.

4.4 Component Matrix and Rotated Component Matrix

The component matrix in the Appendix B (Table B4) presents the initial factor loadings. The factor loadings associated with a variable is the correlation between the factor and the standard score of the variable.

The component matrix is rotated by varimax for the purpose of establishing a high correlation between variables and factors and in determining what the factor represents.

Table B5 in Appendix B depicts the rotated component matrix and Table B6 in Appendix B presents Eigen values as well as the percentage of variance explained, it is noted that 68.2% of the variance is explained by the six components.

4.5 Factors Extracted and Their Loadings:

The six factors extracted are described and the factor loadings are outlined in Table 1.

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 21

Factor 1, Human Resource Practices, accounts for 15.165% of the total common variance and is a major factor. The nine variables in this factor are all positive and have substantial loadings varying from 0.481 to 0.761.

Factor 2, Personal Contentedness, accounts for 15.039% of the total common variance. The eight variables in this factor are all positive and have substantial loadings varying from 0.525 to 0.849.

Factor 3, Work & Delegation, accounts for 14.316% of the total common variance. The eight variables in this factor are all positive and have substantial loadings varying from 0.599 to 0.694.

Factor 4, Human Resources Policies, accounts for 10.732% of the total common variance. The five variables in this factor are all positive and have substantial loadings varying from 0.497 to 0.739.

Factor

Factor 1

Name given to the factorFactor

loading

Human Resource Practices

.761

Factor Statement

Recruitment Practices

.728Opportunity of promotion

.709Attentions paid to suggestions

.696Freedom to use abilities

.663Career opportunities

.644Fair compensation package

.638Work influence on physical health

.551The availability of infrastructure facilities

.481Grievance mechanism

Factor 2 Personal Contentedness

.849Relationship with patients

.732Relationship with subordinates

.719Relationship with fellow workers

.679Satisfaction with closure

.676With your selection process

.624Individual's job satisfaction

.565Satisfaction of complete task

.525Communication process

Factor 3 Work & Delegation

.694Amount of work (responsibility)

.678Hours of work

.666Job accomplishment

.653HR policies and strategies practiced

.637Physical working conditions in hospital

.623Physical working conditions in my department

.620Company policies practiced

.599Relationship with top management

Factor 4 Human Resources Policies

.739Disciplinary actions

.705Variety in work

.606Rate of Pay(Salary)

.583Job Security

.497Administrative responsibilities

Factor 5 Pride & Recreation Facilities

.731Recreation facilities in combating mental strain

.648Proud to be an employee / private practitioner

.642Sense of pride in doing job

.724Retirement benefitsFactor 6 Retirement Benefits

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A Study of Job Satisfaction Among Doctors Working in Government and Private Hospitals in the State of Andhra Pradesh

Factor 5, Pride & Recreation Facilities, accounts for 7.267% of the total common variance. The three variables in this factor are all positive and have substantial loadings varying from 0.642 to 0.731.Factor 6, Retirement Benefits, accounts for 5.680% of the total common variance. The only variable in this factor are all positive and have substantial loading of 0.724.

5. Conclusions:

In considering appropriate responses to factors that lead doctors’ for Job Satisfaction, six perspectives need to be considered: (i) Human Resource Practices; (ii) Personal Contentedness; (iii) Work & Delegation; (iv) Human Resources Policies, (v) Pride & Recreation Facilities and (vi) Retirement Benefits. The factor scores and the weighted means indicate the prominence given to each of these factors by the respondents. The Human Resource Practices factor has attracted high prominence followed by the Personal Contentedness aspect.These perspectives may suggest the kind of Human Resources Management needed at hospitals for sustainable and higher quality care and ultimately the Job Satisfaction among Doctors.

References:

Akerlof, G.A., Rose, A.K. and Yellen, J.L. (1988), “Job switching and job satisfaction in the US labor market”, Brookings Papers on Economic Activity, Vol. 2, pp. 495-582.

Bono, J.E., Judge, T.A., Patton, G.K. and Thoresen, C.J. (2001), “Job satisfaction-job performance relationship: a qualitative and quantitative review”, Psychological Bulletin, No. 127, pp. 376-407.

Bovier, P.A. and Perneger, T.V. (2003), “Predictors of work satisfaction among physicians”, European Journal of Public Health, Vol. 13 No. 4, pp. 299-305.

Clegg, C.W. (1983), “Psychology of employee lateness, absence and turnover: a methodological critique and an empirical study”, Journal of Applied Psychology, Vol. 68, pp. 88-101.

Dubois, C.A., McKee, M. and Nolte, E. (2006), Human Resources for Health in Europe: A Proposal for a Study by the European Observatory on Health Care Systems, Open University Press, Maidenhead and New York, NY.

Fields D L (2002), “Taking the Measure of Work: A Guide to Validated Scales for Organizational Research and Diagnosis’, Sage Publications Inc., Thousand Oaks, CA

Freeman, R.B. (1978), “Job satisfaction as an economic variable”, The American Economic Review, Vol. 68 No. 2, pp. 135-41.

Grunfeld, E., Zitzelsberger, L., Coristine, M., Whelan, T.J., Aspelund, F. and Evans, W.K. (2005), “Job stress and job satisfaction of cancer care workers”, Psycho-oncology, Vol. 14 No. 1, pp. 61-9.

Hackman, J.R. and Oldham, G.R. (1976), “Motivation through the design of work: test of a theory”, Organizational Behavior and Human Performance, Vol. 16 No. 2, pp. 250-79.

Hackman, J.R. and Oldham, G.R. (1980), Work Redesign, Addison-Wesley, Reading, MA.

Konrad, T.R., Williams, E.S., Linzer, M., McMurray, J., Pathman, D.E., Gerrity, M., Schwartz, M.D., Scheckler, W.E., Van Kirk, J., Rhodes, E. and Douglas, J. (1999), “Measuring physician job satisfaction in a changing workplace and a challenging environment”, Medical Care, Vol. 37 No. 11, pp. 1174-82.

Landon, B.E. (2004), “Career satisfaction among physicians”, Journal of the American Medical Association, Vol. 291 No. 5, p. 634.

Loher, B.T., Noe, R.A., Moeller, N.L. and Fitzgerald, M.P. (1985), “Meta-analysis of the relation of job characteristics to job satisfaction, A”, Journal of Applied Psychology, Vol. 70 No. 2, pp. 280-9.

Mangione, T.W. and Quinn, R.P. (1975), “Job satisfaction counter-productive behavior and drug use at work”, Journal of Applied Psychology, Vol. 60, pp. 114-16.

Masatoshi, M., Okayama, M. and Kajii, E. (2004), “Rural doctors’ satisfaction in Japan: a nationwide survey”, Australian Journal of Rural Health, Vol. 12 No. 2, pp. 40-8.

McEvoy, G.M. and Cascio, W.F. (1985), “Strategies for reducing employee turnover: a meta analysis”, Journal of Applied Psychology, Vol. 70, pp. 342-53.

Murray, L. (2000), “Racial and ethnic differences among Medicare beneficiaries”, Healthcare Financing Review, Vol. 21 No. 4, pp. 1-11.

Nixon, R. and Jaramillo, F. (2003), “Physician satisfaction scale: a proposed enhancement”, Clinical Research and Regulatory Affairs, Vol. 20 No. 4, pp. 447-55.

Rondeau, K.V. and Francescutti, L.H. (2005), “Emergency department overcrowding: the impact of resource scarcity on physician job satisfaction”, Journal of Healthcare Management, Vol. 50 No. 5, pp. 327-40.

Spector, P. (1997), Job Satisfaction, Sage Publications, Thousand Oaks, CA.

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 23

Table 1: Factors Extracted and their Loading

Factor 1, Human Resource Practices, accounts for 15.165% of the total common variance and is a major factor. The nine variables in this factor are all positive and have substantial loadings varying from 0.481 to 0.761.

Factor 2, Personal Contentedness, accounts for 15.039% of the total common variance. The eight variables in this factor are all positive and have substantial loadings varying from 0.525 to 0.849.

Factor 3, Work & Delegation, accounts for 14.316% of the total common variance. The eight variables in this factor are all positive and have substantial loadings varying from 0.599 to 0.694.

Factor 4, Human Resources Policies, accounts for 10.732% of the total common variance. The five variables in this factor are all positive and have substantial loadings varying from 0.497 to 0.739.

Factor

Factor 1

Name given to the factorFactor

loading

Human Resource Practices

.761

Factor Statement

Recruitment Practices

.728Opportunity of promotion

.709Attentions paid to suggestions

.696Freedom to use abilities

.663Career opportunities

.644Fair compensation package

.638Work influence on physical health

.551The availability of infrastructure facilities

.481Grievance mechanism

Factor 2 Personal Contentedness

.849Relationship with patients

.732Relationship with subordinates

.719Relationship with fellow workers

.679Satisfaction with closure

.676With your selection process

.624Individual's job satisfaction

.565Satisfaction of complete task

.525Communication process

Factor 3 Work & Delegation

.694Amount of work (responsibility)

.678Hours of work

.666Job accomplishment

.653HR policies and strategies practiced

.637Physical working conditions in hospital

.623Physical working conditions in my department

.620Company policies practiced

.599Relationship with top management

Factor 4 Human Resources Policies

.739Disciplinary actions

.705Variety in work

.606Rate of Pay(Salary)

.583Job Security

.497Administrative responsibilities

Factor 5 Pride & Recreation Facilities

.731Recreation facilities in combating mental strain

.648Proud to be an employee / private practitioner

.642Sense of pride in doing job

.724Retirement benefitsFactor 6 Retirement Benefits

A Study of Job Satisfaction Among Doctors Working in Government and Private Hospitals in the State of Andhra Pradesh

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A Study of Job Satisfaction Among Doctors Working in Government and Private Hospitals in the State of Andhra Pradesh

Factor 5, Pride & Recreation Facilities, accounts for 7.267% of the total common variance. The three variables in this factor are all positive and have substantial loadings varying from 0.642 to 0.731.Factor 6, Retirement Benefits, accounts for 5.680% of the total common variance. The only variable in this factor are all positive and have substantial loading of 0.724.

5. Conclusions:

In considering appropriate responses to factors that lead doctors’ for Job Satisfaction, six perspectives need to be considered: (i) Human Resource Practices; (ii) Personal Contentedness; (iii) Work & Delegation; (iv) Human Resources Policies, (v) Pride & Recreation Facilities and (vi) Retirement Benefits. The factor scores and the weighted means indicate the prominence given to each of these factors by the respondents. The Human Resource Practices factor has attracted high prominence followed by the Personal Contentedness aspect.These perspectives may suggest the kind of Human Resources Management needed at hospitals for sustainable and higher quality care and ultimately the Job Satisfaction among Doctors.

References:

Akerlof, G.A., Rose, A.K. and Yellen, J.L. (1988), “Job switching and job satisfaction in the US labor market”, Brookings Papers on Economic Activity, Vol. 2, pp. 495-582.

Bono, J.E., Judge, T.A., Patton, G.K. and Thoresen, C.J. (2001), “Job satisfaction-job performance relationship: a qualitative and quantitative review”, Psychological Bulletin, No. 127, pp. 376-407.

Bovier, P.A. and Perneger, T.V. (2003), “Predictors of work satisfaction among physicians”, European Journal of Public Health, Vol. 13 No. 4, pp. 299-305.

Clegg, C.W. (1983), “Psychology of employee lateness, absence and turnover: a methodological critique and an empirical study”, Journal of Applied Psychology, Vol. 68, pp. 88-101.

Dubois, C.A., McKee, M. and Nolte, E. (2006), Human Resources for Health in Europe: A Proposal for a Study by the European Observatory on Health Care Systems, Open University Press, Maidenhead and New York, NY.

Fields D L (2002), “Taking the Measure of Work: A Guide to Validated Scales for Organizational Research and Diagnosis’, Sage Publications Inc., Thousand Oaks, CA

Freeman, R.B. (1978), “Job satisfaction as an economic variable”, The American Economic Review, Vol. 68 No. 2, pp. 135-41.

Grunfeld, E., Zitzelsberger, L., Coristine, M., Whelan, T.J., Aspelund, F. and Evans, W.K. (2005), “Job stress and job satisfaction of cancer care workers”, Psycho-oncology, Vol. 14 No. 1, pp. 61-9.

Hackman, J.R. and Oldham, G.R. (1976), “Motivation through the design of work: test of a theory”, Organizational Behavior and Human Performance, Vol. 16 No. 2, pp. 250-79.

Hackman, J.R. and Oldham, G.R. (1980), Work Redesign, Addison-Wesley, Reading, MA.

Konrad, T.R., Williams, E.S., Linzer, M., McMurray, J., Pathman, D.E., Gerrity, M., Schwartz, M.D., Scheckler, W.E., Van Kirk, J., Rhodes, E. and Douglas, J. (1999), “Measuring physician job satisfaction in a changing workplace and a challenging environment”, Medical Care, Vol. 37 No. 11, pp. 1174-82.

Landon, B.E. (2004), “Career satisfaction among physicians”, Journal of the American Medical Association, Vol. 291 No. 5, p. 634.

Loher, B.T., Noe, R.A., Moeller, N.L. and Fitzgerald, M.P. (1985), “Meta-analysis of the relation of job characteristics to job satisfaction, A”, Journal of Applied Psychology, Vol. 70 No. 2, pp. 280-9.

Mangione, T.W. and Quinn, R.P. (1975), “Job satisfaction counter-productive behavior and drug use at work”, Journal of Applied Psychology, Vol. 60, pp. 114-16.

Masatoshi, M., Okayama, M. and Kajii, E. (2004), “Rural doctors’ satisfaction in Japan: a nationwide survey”, Australian Journal of Rural Health, Vol. 12 No. 2, pp. 40-8.

McEvoy, G.M. and Cascio, W.F. (1985), “Strategies for reducing employee turnover: a meta analysis”, Journal of Applied Psychology, Vol. 70, pp. 342-53.

Murray, L. (2000), “Racial and ethnic differences among Medicare beneficiaries”, Healthcare Financing Review, Vol. 21 No. 4, pp. 1-11.

Nixon, R. and Jaramillo, F. (2003), “Physician satisfaction scale: a proposed enhancement”, Clinical Research and Regulatory Affairs, Vol. 20 No. 4, pp. 447-55.

Rondeau, K.V. and Francescutti, L.H. (2005), “Emergency department overcrowding: the impact of resource scarcity on physician job satisfaction”, Journal of Healthcare Management, Vol. 50 No. 5, pp. 327-40.

Spector, P. (1997), Job Satisfaction, Sage Publications, Thousand Oaks, CA.

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 23

Table 1: Factors Extracted and their Loading

Stoddard, J.J., Hargraves, J.L., Reed, M. and Vratil, A. (2001), “Managed care, professional autonomy and income”, Journal of General Internal Medicine, Vol. 16 No. 10, pp. 675-84.

Warr P, Cook J and Wall T (1979), “Scales for the Measurement of Some Work Attitudes and Aspects of Psychological Well-Being”, Journal of Occupational Psychology, Vol. 52, pp.129-148.

Weiss, A. (1984), “Determinants of quit behavior”, Journal of Labor Economics, Vol. 2 No. 3, pp. 371-87.

Williams, E.S., Konrad, T.R., Linzer, M., McMurray, J., Pathman, D.E., Gerrity, M., Schwartz, M.K., Scheckler, W.E., Van Kirk, J., Rhodes, E. and Douglas, J. (2003), “Refining the measurement of physician job satisfaction: results from the physician worklife survey”, Medical Care, Vol. 37 No. 11, pp. 1140-54.

Appendix: A

Table A1: Respondents Profile

Demographic Variable Character Frequency Percent Cumulative Percent

Male 60 50.8 50.8

Female 58 49.2 100.0

Total 118 100.0

Married 114 96.6 96.6

Unmarried 4 3.4 100.0

Total 118 100.0

Government 106 89.8 89.8

Corporate 6 5.1 94.9

Own Practitioner 6 5.1 100.0

Total 118 100.0

< 25 years 2 1.7 1.7

25 to 35 years 18 15.3 16.9

35 to 45 years 30 25.4 42.4

45 to 60 years 68 57.6 100.0

Total 118 100.0

less than 5 Years 18 15.2 15.2

5 to 10 years 6 5.1 20.3

10 to 15 years 32 27.1 47.4

15 to 20 years 34 28.8 76.2

20 to 25 years 16 13.6 89.8

Above 25 Years 12 10.2 100

Total 118 100

MBBS 4 3.4 3.4

BDS 4 3.4 6.8

MD 4 3.4 10.2

MS 92 78.0 88.1

MDS 12 10.2 98.3

Others 2 1.7 100.0

Total 118 100.0

Gender

Marital Status

Nature of Organization

Age

Years of Experience

Qualification

A Study of Job Satisfaction Among Doctors Working in Government and Private Hospitals in the State of Andhra Pradesh

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A Study of Job Satisfaction Among Doctors Working in Government and Private Hospitals in the State of Andhra Pradesh

Demographic Variable Character Frequency Percent Cumulative Percent

Civil Assistant Surgeon 14 11.9 11.9

Civil Surgeon(General) 2 1.7 13.6

Tutor or Jr/Sr Resident 4 3.4 17

Assistant Professor 28 23.7 40.7

Associate Professor 8 6.8 47.4

Professor 44 37.3 84.7

HoD 14 11.9 96.6

Others 4 3.4 100.0

Total 118 100.0

< Rs 10000 2 1.7 1.7

Rs 10000 to Rs 20000 10 8.5 10.2

Rs 20000 to Rs 30000 2 1.7 11.9

Rs 30000 to Rs 50000 34 28.8 40.7

Rs 50000 to Rs 75000 50 42.4 83.1

> Rs 75000 20 16.9 100.0

Total 118 100.0

< 2 34 28.8 28.8

2 to 4 80 67.8 96.6

4 to 6 2 1.7 98.3

Above 6 2 1.7 100.0

Total 118 100.0

Designation

Salary

No. of Family dependents

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 25

Stoddard, J.J., Hargraves, J.L., Reed, M. and Vratil, A. (2001), “Managed care, professional autonomy and income”, Journal of General Internal Medicine, Vol. 16 No. 10, pp. 675-84.

Warr P, Cook J and Wall T (1979), “Scales for the Measurement of Some Work Attitudes and Aspects of Psychological Well-Being”, Journal of Occupational Psychology, Vol. 52, pp.129-148.

Weiss, A. (1984), “Determinants of quit behavior”, Journal of Labor Economics, Vol. 2 No. 3, pp. 371-87.

Williams, E.S., Konrad, T.R., Linzer, M., McMurray, J., Pathman, D.E., Gerrity, M., Schwartz, M.K., Scheckler, W.E., Van Kirk, J., Rhodes, E. and Douglas, J. (2003), “Refining the measurement of physician job satisfaction: results from the physician worklife survey”, Medical Care, Vol. 37 No. 11, pp. 1140-54.

Appendix: A

Table A1: Respondents Profile

Demographic Variable Character Frequency Percent Cumulative Percent

Male 60 50.8 50.8

Female 58 49.2 100.0

Total 118 100.0

Married 114 96.6 96.6

Unmarried 4 3.4 100.0

Total 118 100.0

Government 106 89.8 89.8

Corporate 6 5.1 94.9

Own Practitioner 6 5.1 100.0

Total 118 100.0

< 25 years 2 1.7 1.7

25 to 35 years 18 15.3 16.9

35 to 45 years 30 25.4 42.4

45 to 60 years 68 57.6 100.0

Total 118 100.0

less than 5 Years 18 15.2 15.2

5 to 10 years 6 5.1 20.3

10 to 15 years 32 27.1 47.4

15 to 20 years 34 28.8 76.2

20 to 25 years 16 13.6 89.8

Above 25 Years 12 10.2 100

Total 118 100

MBBS 4 3.4 3.4

BDS 4 3.4 6.8

MD 4 3.4 10.2

MS 92 78.0 88.1

MDS 12 10.2 98.3

Others 2 1.7 100.0

Total 118 100.0

Gender

Marital Status

Nature of Organization

Age

Years of Experience

Qualification

A Study of Job Satisfaction Among Doctors Working in Government and Private Hospitals in the State of Andhra Pradesh

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A Study of Job Satisfaction Among Doctors Working in Government and Private Hospitals in the State of Andhra Pradesh

Demographic Variable Character Frequency Percent Cumulative Percent

Civil Assistant Surgeon 14 11.9 11.9

Civil Surgeon(General) 2 1.7 13.6

Tutor or Jr/Sr Resident 4 3.4 17

Assistant Professor 28 23.7 40.7

Associate Professor 8 6.8 47.4

Professor 44 37.3 84.7

HoD 14 11.9 96.6

Others 4 3.4 100.0

Total 118 100.0

< Rs 10000 2 1.7 1.7

Rs 10000 to Rs 20000 10 8.5 10.2

Rs 20000 to Rs 30000 2 1.7 11.9

Rs 30000 to Rs 50000 34 28.8 40.7

Rs 50000 to Rs 75000 50 42.4 83.1

> Rs 75000 20 16.9 100.0

Total 118 100.0

< 2 34 28.8 28.8

2 to 4 80 67.8 96.6

4 to 6 2 1.7 98.3

Above 6 2 1.7 100.0

Total 118 100.0

Designation

Salary

No. of Family dependents

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 25

Table A2: Descriptive of Response

Sl. No. Aspect of Job Satisfaction Mode Mean Std. Deviation

1 Physical working conditions in hospital 3 3.34 1.428

2 Physical working conditions in my department 4 3.08 1.350

3 Relationship with top management 2 3.10 1.487

4 Relationship with fellow workers 3 2.58 1.215

5 Amount of work (responsibility) 3 2.75 1.178

6 Rate of Pay(Salary) 4 3.66 1.509

7 Freedom to use abilities 3 3.37 1.524

8 Opportunity of promotion 4 4.08 1.667

9 Attentions paid to suggestions 4 3.63 1.512

10 Hours of work 3 3.15 1.454

11 Job Security 1 2.54 1.594

12 Variety in work 3 3.29 1.359

13 Relationship with subordinates 3 2.54 1.231

14 Relationship with patients 4 3.12 1.347

15 Company policies practiced 4 3.83 1.229

16 Job accomplishment 3 3.22 1.213

17 Individual's job satisfaction 2 2.68 1.377

18 Fair compensation package 3 3.83 1.361

19 The availability of infrastructure facilities 4 3.88 1.385

20 Career opportunities 4 3.97 1.490

21 Retirement benefits 4 3.64 1.555

22 Satisfaction of complete task 4 3.32 1.413

23 Satisfaction with closure 4 3.17 1.015

24 Administrative responsibilities 3 3.32 1.339

25 With your selection process 4 3.22 1.282

26 Proud to be an employee / private practitioner 3 2.58 1.257

27 Sense of pride in doing job 1 2.63 1.370

28 Communication process 2 2.64 1.465

29 Recreation facilities in combating mental strain 6 4.86 1.719

30 Work influence on physical health 3 3.81 1.749

31 With the HR policies and strategies 4 3.95 1.437

32 Recruitment Practices 4 4.34 1.379

33 Grievance mechanism 4 3.83 1.549

34 Disciplinary actions 3 3.61 1.396

Max 4.86 1.749

Min 2.54 1.015

Range 2.32 0.734

A Study of Job Satisfaction Among Doctors Working in Government and Private Hospitals in the State of Andhra Pradesh

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A Study of Job Satisfaction Among Doctors Working in Government and Private Hospitals in the State of Andhra Pradesh

Appendix B – Factor Analysis

Table B1: Communalities

Initial Extraction

Physical working conditions in hospital 1.000 .834

Physical working conditions in my department 1.000 .668

Relationship with top management 1.000 .728

Relationship with fellow workers 1.000 .697

Amount of work (responsibility) 1.000 .875

Rate of Pay(Salary) 1.000 .782

Freedom to use abilities 1.000 .838

Opportunity of promotion 1.000 .760

Attentions paid to suggestions 1.000 .767

Hours of work 1.000 .826

Job Security 1.000 .727

Variety in work 1.000 .689

Relationship with subordinates 1.000 .867

Relationship with patients 1.000 .780

Company policies practiced 1.000 .682

Job accomplishment 1.000 .723

Individual's job satisfaction 1.000 .773

Fair compensation package 1.000 .682

The availability of infrastructure facilities 1.000 .629

Career opportunities 1.000 .801

Retirement benefits 1.000 .691

Satisfaction of complete task 1.000 .777

Satisfaction with closure 1.000 .628

Administrative responsibilities 1.000 .590

With your selection process 1.000 .624

Proud to be an employee / private practitioner 1.000 .850

Sense of pride in doing job 1.000 .858

Communication process 1.000 .670

Recreation facilities in combating mental strain 1.000 .766

Work influence on physical health 1.000 .767

With the HR policies and strategies 1.000 .804

Recruitment Practices 1.000 .662

Grievance mechanism 1.000 .840

Disciplinary actions 1.000 .741

Extraction Method: Principal Component Analysis.

Table B2: KMO and Bartlett's Test

Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .684

Bartlett's Test of Sphericity Approx. Chi-Square 3408.941

df. 561

Sig. .000

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 27

Table A2: Descriptive of Response

Sl. No. Aspect of Job Satisfaction Mode Mean Std. Deviation

1 Physical working conditions in hospital 3 3.34 1.428

2 Physical working conditions in my department 4 3.08 1.350

3 Relationship with top management 2 3.10 1.487

4 Relationship with fellow workers 3 2.58 1.215

5 Amount of work (responsibility) 3 2.75 1.178

6 Rate of Pay(Salary) 4 3.66 1.509

7 Freedom to use abilities 3 3.37 1.524

8 Opportunity of promotion 4 4.08 1.667

9 Attentions paid to suggestions 4 3.63 1.512

10 Hours of work 3 3.15 1.454

11 Job Security 1 2.54 1.594

12 Variety in work 3 3.29 1.359

13 Relationship with subordinates 3 2.54 1.231

14 Relationship with patients 4 3.12 1.347

15 Company policies practiced 4 3.83 1.229

16 Job accomplishment 3 3.22 1.213

17 Individual's job satisfaction 2 2.68 1.377

18 Fair compensation package 3 3.83 1.361

19 The availability of infrastructure facilities 4 3.88 1.385

20 Career opportunities 4 3.97 1.490

21 Retirement benefits 4 3.64 1.555

22 Satisfaction of complete task 4 3.32 1.413

23 Satisfaction with closure 4 3.17 1.015

24 Administrative responsibilities 3 3.32 1.339

25 With your selection process 4 3.22 1.282

26 Proud to be an employee / private practitioner 3 2.58 1.257

27 Sense of pride in doing job 1 2.63 1.370

28 Communication process 2 2.64 1.465

29 Recreation facilities in combating mental strain 6 4.86 1.719

30 Work influence on physical health 3 3.81 1.749

31 With the HR policies and strategies 4 3.95 1.437

32 Recruitment Practices 4 4.34 1.379

33 Grievance mechanism 4 3.83 1.549

34 Disciplinary actions 3 3.61 1.396

Max 4.86 1.749

Min 2.54 1.015

Range 2.32 0.734

A Study of Job Satisfaction Among Doctors Working in Government and Private Hospitals in the State of Andhra Pradesh

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A Study of Job Satisfaction Among Doctors Working in Government and Private Hospitals in the State of Andhra Pradesh

Appendix B – Factor Analysis

Table B1: Communalities

Initial Extraction

Physical working conditions in hospital 1.000 .834

Physical working conditions in my department 1.000 .668

Relationship with top management 1.000 .728

Relationship with fellow workers 1.000 .697

Amount of work (responsibility) 1.000 .875

Rate of Pay(Salary) 1.000 .782

Freedom to use abilities 1.000 .838

Opportunity of promotion 1.000 .760

Attentions paid to suggestions 1.000 .767

Hours of work 1.000 .826

Job Security 1.000 .727

Variety in work 1.000 .689

Relationship with subordinates 1.000 .867

Relationship with patients 1.000 .780

Company policies practiced 1.000 .682

Job accomplishment 1.000 .723

Individual's job satisfaction 1.000 .773

Fair compensation package 1.000 .682

The availability of infrastructure facilities 1.000 .629

Career opportunities 1.000 .801

Retirement benefits 1.000 .691

Satisfaction of complete task 1.000 .777

Satisfaction with closure 1.000 .628

Administrative responsibilities 1.000 .590

With your selection process 1.000 .624

Proud to be an employee / private practitioner 1.000 .850

Sense of pride in doing job 1.000 .858

Communication process 1.000 .670

Recreation facilities in combating mental strain 1.000 .766

Work influence on physical health 1.000 .767

With the HR policies and strategies 1.000 .804

Recruitment Practices 1.000 .662

Grievance mechanism 1.000 .840

Disciplinary actions 1.000 .741

Extraction Method: Principal Component Analysis.

Table B2: KMO and Bartlett's Test

Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .684

Bartlett's Test of Sphericity Approx. Chi-Square 3408.941

df. 561

Sig. .000

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 27

Table B3: Total Variance Explained

Compo- Initial Eigen values Extraction Sums of Squared Loadings

nent Total % of Variance Cumulative % Total % of Variance Cumulative %

1 10.249 30.144 30.144 10.249 30.144 30.144

2 4.594 13.512 43.656 4.594 13.512 43.656

3 3.178 9.348 53.004 3.178 9.348 53.004

4 2.120 6.236 59.240 2.120 6.236 59.240

5 1.566 4.605 63.845 1.566 4.605 63.845

6 1.481 4.356 68.200 1.481 4.356 68.200

7 1.147 3.374 71.574 1.147 3.374 71.574

8 1.061 3.121 74.695 1.061 3.121 74.695

9 .984 2.894 77.589

10 .847 2.490 80.079

11 .790 2.323 82.402

12 .668 1.966 84.368

13 .591 1.737 86.105

14 .557 1.638 87.743

15 .502 1.476 89.219

16 .460 1.353 90.572

17 .389 1.144 91.717

18 .354 1.042 92.758

19 .335 .986 93.745

20 .323 .950 94.695

21 .300 .883 95.577

22 .229 .672 96.249

23 .207 .609 96.858

24 .187 .550 97.408

25 .167 .491 97.899

26 .153 .450 98.349

27 .124 .364 98.713

28 .093 .273 98.986

29 .088 .260 99.246

30 .078 .228 99.475

31 .069 .204 99.678

32 .043 .126 99.804

33 .040 .117 99.921

34 .027 .079 100.000

Extraction Method: Principal Component Analysis.

Screen Plot:

A Study of Job Satisfaction Among Doctors Working in Government and Private Hospitals in the State of Andhra Pradesh

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 201228

A Study of Job Satisfaction Among Doctors Working in Government and Private Hospitals in the State of Andhra Pradesh

Table B4 : Component Matrixa

Component

1 2 3 4 5 6 7 8

Job accomplishment .712

Freedom to use abilities .711 .353 .302

Amount of work (responsibility) .704 -.357 -.338

HR policies and strategies practiced .702 -.375

Hours of work .698 -.399

Proud to be an employee / private practitioner .681 -.467 -.354

Relationship with subordinates .678 -.462 .312

Physical working conditions in my department .650 -.410

Job Security .638 -.427

Relationship with top management .624 -.305 -.424

Satisfaction of complete task .614 -.358 -.414

Sense of pride in doing job .608 -.541

Rate of Pay(Salary) .596 .498 .318

Administrative responsibilities .587 -.335

Relationship with fellow workers .586 -.509

Individual's job satisfaction .556 -.322 .519

Work influence on physical health .545 .397 .420

Satisfaction with closure .534 -.434

Communication process .519 .414

The availability of infrastructure facilities .518 .418 -.310

Selection process .503 .318 .364

Company policies practiced .461 -.430 .372

Fair compensation package .644 .421

Relationship with patients .389 -.635 .316

Attentions paid to suggestions .565 .596

Grievance mechanism .371 .558 -.335 -.389

Recruitment Practices .480 .554

Career opportunities .804

Opportunity of promotion .395 .619 .332

Disciplinary actions .421 .363 -.530 .364

Variety in work .459 .520

Physical working conditions in hospital .445 .351 -.499 -.329 .334

Retirement benefits .416 .337 .604

Recreation facilities in combating mental strain .388 .353 -.383 -.475

Extraction Method: Principal Component Analysis.

a. 8 components extracted.

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 29

Table B3: Total Variance Explained

Compo- Initial Eigen values Extraction Sums of Squared Loadings

nent Total % of Variance Cumulative % Total % of Variance Cumulative %

1 10.249 30.144 30.144 10.249 30.144 30.144

2 4.594 13.512 43.656 4.594 13.512 43.656

3 3.178 9.348 53.004 3.178 9.348 53.004

4 2.120 6.236 59.240 2.120 6.236 59.240

5 1.566 4.605 63.845 1.566 4.605 63.845

6 1.481 4.356 68.200 1.481 4.356 68.200

7 1.147 3.374 71.574 1.147 3.374 71.574

8 1.061 3.121 74.695 1.061 3.121 74.695

9 .984 2.894 77.589

10 .847 2.490 80.079

11 .790 2.323 82.402

12 .668 1.966 84.368

13 .591 1.737 86.105

14 .557 1.638 87.743

15 .502 1.476 89.219

16 .460 1.353 90.572

17 .389 1.144 91.717

18 .354 1.042 92.758

19 .335 .986 93.745

20 .323 .950 94.695

21 .300 .883 95.577

22 .229 .672 96.249

23 .207 .609 96.858

24 .187 .550 97.408

25 .167 .491 97.899

26 .153 .450 98.349

27 .124 .364 98.713

28 .093 .273 98.986

29 .088 .260 99.246

30 .078 .228 99.475

31 .069 .204 99.678

32 .043 .126 99.804

33 .040 .117 99.921

34 .027 .079 100.000

Extraction Method: Principal Component Analysis.

Screen Plot:

A Study of Job Satisfaction Among Doctors Working in Government and Private Hospitals in the State of Andhra Pradesh

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 201228

A Study of Job Satisfaction Among Doctors Working in Government and Private Hospitals in the State of Andhra Pradesh

Table B4 : Component Matrixa

Component

1 2 3 4 5 6 7 8

Job accomplishment .712

Freedom to use abilities .711 .353 .302

Amount of work (responsibility) .704 -.357 -.338

HR policies and strategies practiced .702 -.375

Hours of work .698 -.399

Proud to be an employee / private practitioner .681 -.467 -.354

Relationship with subordinates .678 -.462 .312

Physical working conditions in my department .650 -.410

Job Security .638 -.427

Relationship with top management .624 -.305 -.424

Satisfaction of complete task .614 -.358 -.414

Sense of pride in doing job .608 -.541

Rate of Pay(Salary) .596 .498 .318

Administrative responsibilities .587 -.335

Relationship with fellow workers .586 -.509

Individual's job satisfaction .556 -.322 .519

Work influence on physical health .545 .397 .420

Satisfaction with closure .534 -.434

Communication process .519 .414

The availability of infrastructure facilities .518 .418 -.310

Selection process .503 .318 .364

Company policies practiced .461 -.430 .372

Fair compensation package .644 .421

Relationship with patients .389 -.635 .316

Attentions paid to suggestions .565 .596

Grievance mechanism .371 .558 -.335 -.389

Recruitment Practices .480 .554

Career opportunities .804

Opportunity of promotion .395 .619 .332

Disciplinary actions .421 .363 -.530 .364

Variety in work .459 .520

Physical working conditions in hospital .445 .351 -.499 -.329 .334

Retirement benefits .416 .337 .604

Recreation facilities in combating mental strain .388 .353 -.383 -.475

Extraction Method: Principal Component Analysis.

a. 8 components extracted.

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 29

Table B5 : Rotated Component Matrixa

Component

1 2 3 4 5 6

Recruitment Practices .761

Opportunity of promotion .728 .438

Attentions paid to suggestions .709 .344

Freedom to use abilities .696 .336

Career opportunities .663 -.397 .366

Fair compensation package .644

Work influence on physical health .638

The availability of infrastructure facilities .551 .468

Relationship with patients .849

Relationship with subordinates .732 .375

Relationship with fellow workers .719

Satisfaction with closure .679

Selection process .676

Individual's job satisfaction .624 .582

Satisfaction of complete task .565 .451

Communication process .465 .525

Amount of work (responsibility) .694 .431

Hours of work .678 .503

Job accomplishment .424 .666

HR policies and strategies practiced .437 .653

Physical working conditions in hospital .305 .637 -.447

Physical working conditions in my department .623 .323

Company policies practiced .325 .620

Relationship with top management .599 .378

Disciplinary actions .739

Variety in work .705

Rate of Pay(Salary) .537 .606

Job Security .508 .583

Administrative responsibilities .438 .497

Recreation facilities in combating mental strain .333 .731

Proud to be an employee / private practitioner .523 .300 .648

Sense of pride in doing job .592 .642

Retirement benefits .724

Grievance mechanism .481 .321 -.509

Extraction Method: Principal Component Analysis.

Rotation Method: Varimax with Kaiser Normalization.

a. Rotation converged in 25 iterations.

A Study of Job Satisfaction Among Doctors Working in Government and Private Hospitals in the State of Andhra Pradesh

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A Study of Job Satisfaction Among Doctors Working in Government and Private Hospitals in the State of Andhra Pradesh

Table B6 : Total Variance Explained

Component Rotation Sums of Squared Loadings

Total % of Variance Cumulative %

1 5.156 15.165 15.165

2 5.113 15.039 30.204

3 4.867 14.316 44.521

4 3.649 10.732 55.253

5 2.471 7.267 62.520

6 1.931 5.680 68.200

Extraction Method: Principal Component Analysis.

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 31

Table B5 : Rotated Component Matrixa

Component

1 2 3 4 5 6

Recruitment Practices .761

Opportunity of promotion .728 .438

Attentions paid to suggestions .709 .344

Freedom to use abilities .696 .336

Career opportunities .663 -.397 .366

Fair compensation package .644

Work influence on physical health .638

The availability of infrastructure facilities .551 .468

Relationship with patients .849

Relationship with subordinates .732 .375

Relationship with fellow workers .719

Satisfaction with closure .679

Selection process .676

Individual's job satisfaction .624 .582

Satisfaction of complete task .565 .451

Communication process .465 .525

Amount of work (responsibility) .694 .431

Hours of work .678 .503

Job accomplishment .424 .666

HR policies and strategies practiced .437 .653

Physical working conditions in hospital .305 .637 -.447

Physical working conditions in my department .623 .323

Company policies practiced .325 .620

Relationship with top management .599 .378

Disciplinary actions .739

Variety in work .705

Rate of Pay(Salary) .537 .606

Job Security .508 .583

Administrative responsibilities .438 .497

Recreation facilities in combating mental strain .333 .731

Proud to be an employee / private practitioner .523 .300 .648

Sense of pride in doing job .592 .642

Retirement benefits .724

Grievance mechanism .481 .321 -.509

Extraction Method: Principal Component Analysis.

Rotation Method: Varimax with Kaiser Normalization.

a. Rotation converged in 25 iterations.

A Study of Job Satisfaction Among Doctors Working in Government and Private Hospitals in the State of Andhra Pradesh

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 201230

A Study of Job Satisfaction Among Doctors Working in Government and Private Hospitals in the State of Andhra Pradesh

Table B6 : Total Variance Explained

Component Rotation Sums of Squared Loadings

Total % of Variance Cumulative %

1 5.156 15.165 15.165

2 5.113 15.039 30.204

3 4.867 14.316 44.521

4 3.649 10.732 55.253

5 2.471 7.267 62.520

6 1.931 5.680 68.200

Extraction Method: Principal Component Analysis.

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 31

ABSTRACT

The manufacturing of cosmetics is currently dominated by a small number of multinational corporations th

that originated in the early 20 century, but the distribution and sale of cosmetics is spread among a wide

range of different businesses. Rising consumer awareness and changing lifestyles amongst India’s

booming population have led to significant opportunities in cosmetics. The reason behind this growth is

down to people becoming more beauty conscious in India, due to changing lifestyles and increasing

consumer awareness giving market players lucrative opportunities. The main purpose of the study is to

find out global brand familiarity, favorability and to study consumer perception in terms of consumer

expectations and brand loyalty in color cosmetics in Hyderabad. The data is collected from 100

customers of various brand users by administering a structured questionnaire using non-probability

sampling technique. Chi-square test is applied for testing hypotheses on brand loyalty, consumer

expectations and brand familiarity. It is found that Lakme and Revlon brands are very familiar and

consumers are very favorable to these brands. Good appearance, attractive look, younger look and

fashionable are major expectations of the customer on color cosmetics.

Key words: Customer Expectations, Brand Familiarity, Favorability, Brand Loyalty

1. Introduction

Brand Image, which is usually include product’ name, its main physical features, and appearance (including packing and logo), and its main function is, the key to answer the question of how consumer chooses among alternative brands after information gathering processes of buyer behavior. Alternative evaluation is how the consumer uses this information to evaluate the options and arrive at a brand choice. The perspective focusing on psychological attributes of a product of consumer states that consumers often choose products, services and activities over others because these associate these attributes with a certain life style, a self-image or ascribed status. They attempt to preserve or enhance their self-image by buying products that they believe that are congruent with the self-image (Sirgy, 1982). For that reason, marketing professionals see the symbolic image of products and/or services as more important in their success than their physical characteristics and attributes (Aaker, 1991). Therefore, within such a framework it seems possible to mention brand familiarity and

favorability to understand target customer’s knowledge of the products or services for positioning. The paper focuses on these aspects of color cosmetics in Hyderabad.

2. Literature Review

Cosmetics are the substances used to enhance the appearance or odor of the human body. Cosmetics include skin-care creams, lotions, powders, perfumes, lipsticks, fingernail and toe nail polish, eye and facial makeup, novelettes, permanent waves, colored contact lenses, hair colors, hair sprays and gels, deodorants, hand sanitizer, baby products, bath oils, bubble baths, bath salts, butters and many other types of products. A subset of cosmetics is called "make-up," which refers primarily to colored products intended to alter the user’s appearance.

The manufacture of cosmetics is currently dominated by a small number of multinational corporations that

thoriginated in the early 20 century, but the distribution and sale of cosmetics is spread among a wide range of different businesses. The U.S. Food and Drug

Brand Image Analysis: A Study on Cosmetics in Hyderabad

Suresh Kandulapati*

* Assistant Professor, Padmasri Dr B V Raju Institute of Technology, Vishnupur, Narsapur, Medak District, Andhra Pradesh, India.

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 201232

Administration (FDA), which regulates cosmetics in the United States defines cosmetics as: "intended to be applied to the human body for cleansing, beautifying, promoting attractiveness, or altering the appearance without affecting the body's structure or functions."

Rising consumer awareness and changing lifestyles amongst India’s booming population have led to significant opportunities in cosmetics, which has traditionally been dominated by existing market players, many of which are home-grown businesses. However, according to the research team, growth in this market is now leading to further opportunities for existing players as well as opportunities for larger multinationals. This growth is being driven by increased access to branded goods, helped by the significant development of the retail segment, together with increasing number of women workers who are now enjoying increased economic power and financial independence.

The study, entitled “Indian Cosmetic Sector Analysis (2009-2012)” also takes into account all the other key categories, shows that, in general, it is affordability and a rising consumer base that are the main drivers behind cosmetic sales of around INR 356.6bn ($9bn) last year. Researchers indicated that Indian cosmetic industry is expected to remain on its growth track in coming years. According to the study, the industry will grow at a CAGR of around 17 per cent between 2010 and 2013, underlining the fact that categories such as skin care and hair care are expected to return even higher rates of growth. The reason behind this growth is down to people becoming more beauty conscious in India, due to changing lifestyles and increasing consumer awareness giving market players lucrative opportunities.

3. Research Problem

Knowledge of brand awareness and its role is important for the design of an organization’s marketing strategies. This study aims to determine the brand familiarity, favorability and loyalty in case of Color Cosmetics. Image analysis is the base for developing communication strategies to strengthen company’s products or services.

4. Objectives

The study has been carried out with the following objectives :

(i) To find out brand familiarity and favorability of major brands in Color Cosmetics.

(ii) To study consumer perception in terms of expectations and brand loyalty in case of color cosmetics in Hyderabad.

5. Hypotheses

i). Brand loyalty and age group are independent in case of cosmetics

ii) Consumer expectations on younger look, good appearance, fashionable and to look attractive are equally distributed

iii) There is significant difference in the preference for a particular brand between users and non-users

6. Methodology

The data has been collected through a structured questionnaire by adopting non-probability sampling technique from 100 customers of cosmetics targeted at ladies in Hyderabad. Brand familiarity and favorability scale is applied to measure brand familiarity and favorability. Chi-square test is applied to test hypotheses. The respondents are classified as under graduates, post graduates, working women and housewives. Based on age groups, respondents are further classified into below 25 years and above 25 years to test hypotheses. Again, they are classified into users and non-users, and favored and not favored for analyzing brand preference and brand loyalty respectively. Major cosmetics brands considered for the study are Lakme, Revlon, Elle 18 and Maybelline.

7. Brand Familiarity

Lakme and Revlon brands are very familiar to all consumers and brand awareness level is 100%. In case of Elle 18 and Maybelline, familiarity varies from 63% to 94% as shown in Table 1. The brand awareness of color cosmetics is very high in Hyderabad.

Table 1: Brand Familiarity (%)

Brand Image Analysis: A Study on Cosmetics in Hyderabad

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 33

Classification Lakme Revlon Elle 18 Maybelline

Graduates 100 100 94 76

Post Graduates 100 100 93 81

Working Women 100 100 90 88

Housewives 100 100 75 63

ABSTRACT

The manufacturing of cosmetics is currently dominated by a small number of multinational corporations th

that originated in the early 20 century, but the distribution and sale of cosmetics is spread among a wide

range of different businesses. Rising consumer awareness and changing lifestyles amongst India’s

booming population have led to significant opportunities in cosmetics. The reason behind this growth is

down to people becoming more beauty conscious in India, due to changing lifestyles and increasing

consumer awareness giving market players lucrative opportunities. The main purpose of the study is to

find out global brand familiarity, favorability and to study consumer perception in terms of consumer

expectations and brand loyalty in color cosmetics in Hyderabad. The data is collected from 100

customers of various brand users by administering a structured questionnaire using non-probability

sampling technique. Chi-square test is applied for testing hypotheses on brand loyalty, consumer

expectations and brand familiarity. It is found that Lakme and Revlon brands are very familiar and

consumers are very favorable to these brands. Good appearance, attractive look, younger look and

fashionable are major expectations of the customer on color cosmetics.

Key words: Customer Expectations, Brand Familiarity, Favorability, Brand Loyalty

1. Introduction

Brand Image, which is usually include product’ name, its main physical features, and appearance (including packing and logo), and its main function is, the key to answer the question of how consumer chooses among alternative brands after information gathering processes of buyer behavior. Alternative evaluation is how the consumer uses this information to evaluate the options and arrive at a brand choice. The perspective focusing on psychological attributes of a product of consumer states that consumers often choose products, services and activities over others because these associate these attributes with a certain life style, a self-image or ascribed status. They attempt to preserve or enhance their self-image by buying products that they believe that are congruent with the self-image (Sirgy, 1982). For that reason, marketing professionals see the symbolic image of products and/or services as more important in their success than their physical characteristics and attributes (Aaker, 1991). Therefore, within such a framework it seems possible to mention brand familiarity and

favorability to understand target customer’s knowledge of the products or services for positioning. The paper focuses on these aspects of color cosmetics in Hyderabad.

2. Literature Review

Cosmetics are the substances used to enhance the appearance or odor of the human body. Cosmetics include skin-care creams, lotions, powders, perfumes, lipsticks, fingernail and toe nail polish, eye and facial makeup, novelettes, permanent waves, colored contact lenses, hair colors, hair sprays and gels, deodorants, hand sanitizer, baby products, bath oils, bubble baths, bath salts, butters and many other types of products. A subset of cosmetics is called "make-up," which refers primarily to colored products intended to alter the user’s appearance.

The manufacture of cosmetics is currently dominated by a small number of multinational corporations that

thoriginated in the early 20 century, but the distribution and sale of cosmetics is spread among a wide range of different businesses. The U.S. Food and Drug

Brand Image Analysis: A Study on Cosmetics in Hyderabad

Suresh Kandulapati*

* Assistant Professor, Padmasri Dr B V Raju Institute of Technology, Vishnupur, Narsapur, Medak District, Andhra Pradesh, India.

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 201232

Administration (FDA), which regulates cosmetics in the United States defines cosmetics as: "intended to be applied to the human body for cleansing, beautifying, promoting attractiveness, or altering the appearance without affecting the body's structure or functions."

Rising consumer awareness and changing lifestyles amongst India’s booming population have led to significant opportunities in cosmetics, which has traditionally been dominated by existing market players, many of which are home-grown businesses. However, according to the research team, growth in this market is now leading to further opportunities for existing players as well as opportunities for larger multinationals. This growth is being driven by increased access to branded goods, helped by the significant development of the retail segment, together with increasing number of women workers who are now enjoying increased economic power and financial independence.

The study, entitled “Indian Cosmetic Sector Analysis (2009-2012)” also takes into account all the other key categories, shows that, in general, it is affordability and a rising consumer base that are the main drivers behind cosmetic sales of around INR 356.6bn ($9bn) last year. Researchers indicated that Indian cosmetic industry is expected to remain on its growth track in coming years. According to the study, the industry will grow at a CAGR of around 17 per cent between 2010 and 2013, underlining the fact that categories such as skin care and hair care are expected to return even higher rates of growth. The reason behind this growth is down to people becoming more beauty conscious in India, due to changing lifestyles and increasing consumer awareness giving market players lucrative opportunities.

3. Research Problem

Knowledge of brand awareness and its role is important for the design of an organization’s marketing strategies. This study aims to determine the brand familiarity, favorability and loyalty in case of Color Cosmetics. Image analysis is the base for developing communication strategies to strengthen company’s products or services.

4. Objectives

The study has been carried out with the following objectives :

(i) To find out brand familiarity and favorability of major brands in Color Cosmetics.

(ii) To study consumer perception in terms of expectations and brand loyalty in case of color cosmetics in Hyderabad.

5. Hypotheses

i). Brand loyalty and age group are independent in case of cosmetics

ii) Consumer expectations on younger look, good appearance, fashionable and to look attractive are equally distributed

iii) There is significant difference in the preference for a particular brand between users and non-users

6. Methodology

The data has been collected through a structured questionnaire by adopting non-probability sampling technique from 100 customers of cosmetics targeted at ladies in Hyderabad. Brand familiarity and favorability scale is applied to measure brand familiarity and favorability. Chi-square test is applied to test hypotheses. The respondents are classified as under graduates, post graduates, working women and housewives. Based on age groups, respondents are further classified into below 25 years and above 25 years to test hypotheses. Again, they are classified into users and non-users, and favored and not favored for analyzing brand preference and brand loyalty respectively. Major cosmetics brands considered for the study are Lakme, Revlon, Elle 18 and Maybelline.

7. Brand Familiarity

Lakme and Revlon brands are very familiar to all consumers and brand awareness level is 100%. In case of Elle 18 and Maybelline, familiarity varies from 63% to 94% as shown in Table 1. The brand awareness of color cosmetics is very high in Hyderabad.

Table 1: Brand Familiarity (%)

Brand Image Analysis: A Study on Cosmetics in Hyderabad

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 33

Classification Lakme Revlon Elle 18 Maybelline

Graduates 100 100 94 76

Post Graduates 100 100 93 81

Working Women 100 100 90 88

Housewives 100 100 75 63

Figure 3: Brand Favorability

From the above graph, it is obvious that brand favorability becomes more for Lakme and least for Maybelline. Similarly, brand unfavorability becomes more for Maybelline and least for Lakme. Further, the degree of brand unfavorability is more as compared to brand favorability.

10 Brand Loyalty

The respondents are classified into two groups as shown in the following table based on age criteria and hypothesis has been tested.

H0: Brand loyalty and age group are independent in case of cosmetics

Table 4: Brand Loyalty

By applying Chi-Square test on the data presented in Table 4, the calculated value 0.05 is less than the table value (7.88) for 1 degree of freedom, at 5% significant level. So, null hypothesis is accepted. Hence, brand loyalty and age group are independent in case of cosmetics.

Figure 4: Brand Loyalty

From the above graph, it is clear that brand loyalty becomes more favourable for all age groups. Further, the

Figure 1: Brand Familiarity

For Lakme and Revlon, brand familiarity for Graduates, Post graduates, working women and housewives is almost similar, while for Elle 18 brand familiarity becomes highest for Graduates. Lastly for Maybelline, brand familiarity becomes highest for working women.

8. Customer Expectations

Major expectations of consumers on cosmetics are good appearance, attractive look, fashionable and younger look as shown in the following Table 2.

Table 2: Customer Expectations (%)

From the above table it is obvious that customer expectations in terms of percentage becomes highest for housewives with good appearance (i.e. 77.78%), for undergraduates with attractive look (i.e. 25%), for housewives with fashionable (i.e. 5.56%) and for Post Graduates with younger look (16.67%) respectively.

H0: Consumer expectations in terms of younger look, good appearance, fashionable and attractive look are equally distributed.

Table 3: Customer Expectations

By applying Chi-Square test on the data presented in Table 3, the calculated value 4.28 is less than the table value for 12.8 for 3 degrees of freedom, at 5% significance level. So, null hypothesis is accepted.

Hence, consumer expectations in terms of younger look, good appearance, fashionable and attractive look are equally distributed.

Figure 2: Customer Expectations

From the above graph, it is clear that customer expectations for good appearance becomes highest for housewives. Customer expectations for attractive look becomes highest for undergraduates; customer expectations for fashionable look becomes highest for housewives. Finally for younger look, customer expectations becomes higher for Post Graduates.

9. Brand Favorability

Major brands considered for studying brand favorability are Lakme, Revlon, Elle 18 and Maybelline. The data is classified into users and non-users based on consumers’ brand preference and usage as shown in Table 4 and hypothesis is tested.

H0: There is no significant difference in preference for a particular brand among users and non-users

Table 4: Brand Favorability

By applying Chi-Square test on the data presented in Table 4, the calculated value 96.28 is greater than the Table value (12.8) for 3 degrees of freedom, at 5% significant level. So, null hypothesis is rejected. Hence, there is significant difference in preference for a particular brand among users and non-users.

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 201234

Good Attractive Fashionable Younger

Appearance Look Look

Under Graduates 62.5 25 5 7.5

Post Graduates 55.56 22.22 5.55 16.67

Working Women 66.67 20.83 4.17 8.33

Housewives 77.78 11.11 5.56 5.55

Lakme Revlon Elle 18 Maybelline

Favorable 73 34 22 11

Unfavorable 27 66 78 89

Good Attractive Fashionable Younger Total

Appearance Look Look

Below 34 15 7 2 5825 years

Above 31 6 2 3 4225 years

Total 65 21 9 5 100

Brand Image Analysis: A Study on Cosmetics in Hyderabad

degree of favourable brand loyalty is higher than that of unfavourable brand loyalty.

11. Findings

(i) Brand awareness level is 100% in case of Lakme and Revlon.

(ii) Consumer expectations in terms of younger look, good appearance, attractive look and fashionable are equally distributed in case of cosmetics in Hyderabad.

(iii) Brand Loyalty is independent of age group in the industry.

(iv) There is significant preference for a particular brand among users and non-users in Hyderabad.

12. Conclusion

Brand familiarity is very high for global brands such as Lakme, Revlon, Elle 18 and Maybelline in Hyderabad and it is marked 100% familiarity in case of Lakme and Revlon. The brands meet consumer expectations such as fairness, younger and attractive look, fashionable, and good appearance. So, customers do not want to change their brand. Hence, Brand Loyalty is high in case of color cosmetics. Majority of the consumers are very favorable to Lakme and Revlon brands. It can be concluded that the image of the cosmetics brands such as Lakme and Revlon is positive and very high.

13. References

Aaker, D. (1991), “Managing Brand Equity”, the free press, New York.Berk Ataman, Burç Ülengin, (2003),"A note on the effect of Brand Image on Sales", Journal of Product & Brand Management, 12 (4), pp. 237 – 250. Laetitia Radder, Wei Huang, (2008),"High-involvement and low-involvement products: A comparison of brand awareness among students at a South African university", Journal of Fashion Marketing and Management, 12(2), pp. 232 – 243. Sirgy, MJ (1982), “Self-Concept in Consumer Behavior: A Critical Review”, Journal of Consumer Research, 9, December, pp. 287-300.Gupta S P(2008), Statistical Methods, Sultan Chand & Sons, 37th editionKotler P (2007), Marketing Management, Pearson,

th12 editionSimon Pitman, India color cosmetics market predicted as big growth market, ath t t p : / / w w w. c o s m e t i c s d e s i g n . c o m / Pr o d u c t s -Markets/India-color-cosmetics-market-predicted-as-big-growth-market, assessed on 12.01.2011.

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 35

Brand Image Analysis: A Study on Cosmetics in Hyderabad

Not Favored Favored Total

Below 25 years 15 43 58

Above 25 years 10 32 42

Total 25 75 100

Figure 3: Brand Favorability

From the above graph, it is obvious that brand favorability becomes more for Lakme and least for Maybelline. Similarly, brand unfavorability becomes more for Maybelline and least for Lakme. Further, the degree of brand unfavorability is more as compared to brand favorability.

10 Brand Loyalty

The respondents are classified into two groups as shown in the following table based on age criteria and hypothesis has been tested.

H0: Brand loyalty and age group are independent in case of cosmetics

Table 4: Brand Loyalty

By applying Chi-Square test on the data presented in Table 4, the calculated value 0.05 is less than the table value (7.88) for 1 degree of freedom, at 5% significant level. So, null hypothesis is accepted. Hence, brand loyalty and age group are independent in case of cosmetics.

Figure 4: Brand Loyalty

From the above graph, it is clear that brand loyalty becomes more favourable for all age groups. Further, the

Figure 1: Brand Familiarity

For Lakme and Revlon, brand familiarity for Graduates, Post graduates, working women and housewives is almost similar, while for Elle 18 brand familiarity becomes highest for Graduates. Lastly for Maybelline, brand familiarity becomes highest for working women.

8. Customer Expectations

Major expectations of consumers on cosmetics are good appearance, attractive look, fashionable and younger look as shown in the following Table 2.

Table 2: Customer Expectations (%)

From the above table it is obvious that customer expectations in terms of percentage becomes highest for housewives with good appearance (i.e. 77.78%), for undergraduates with attractive look (i.e. 25%), for housewives with fashionable (i.e. 5.56%) and for Post Graduates with younger look (16.67%) respectively.

H0: Consumer expectations in terms of younger look, good appearance, fashionable and attractive look are equally distributed.

Table 3: Customer Expectations

By applying Chi-Square test on the data presented in Table 3, the calculated value 4.28 is less than the table value for 12.8 for 3 degrees of freedom, at 5% significance level. So, null hypothesis is accepted.

Hence, consumer expectations in terms of younger look, good appearance, fashionable and attractive look are equally distributed.

Figure 2: Customer Expectations

From the above graph, it is clear that customer expectations for good appearance becomes highest for housewives. Customer expectations for attractive look becomes highest for undergraduates; customer expectations for fashionable look becomes highest for housewives. Finally for younger look, customer expectations becomes higher for Post Graduates.

9. Brand Favorability

Major brands considered for studying brand favorability are Lakme, Revlon, Elle 18 and Maybelline. The data is classified into users and non-users based on consumers’ brand preference and usage as shown in Table 4 and hypothesis is tested.

H0: There is no significant difference in preference for a particular brand among users and non-users

Table 4: Brand Favorability

By applying Chi-Square test on the data presented in Table 4, the calculated value 96.28 is greater than the Table value (12.8) for 3 degrees of freedom, at 5% significant level. So, null hypothesis is rejected. Hence, there is significant difference in preference for a particular brand among users and non-users.

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 201234

Good Attractive Fashionable Younger

Appearance Look Look

Under Graduates 62.5 25 5 7.5

Post Graduates 55.56 22.22 5.55 16.67

Working Women 66.67 20.83 4.17 8.33

Housewives 77.78 11.11 5.56 5.55

Lakme Revlon Elle 18 Maybelline

Favorable 73 34 22 11

Unfavorable 27 66 78 89

Good Attractive Fashionable Younger Total

Appearance Look Look

Below 34 15 7 2 5825 years

Above 31 6 2 3 4225 years

Total 65 21 9 5 100

Brand Image Analysis: A Study on Cosmetics in Hyderabad

degree of favourable brand loyalty is higher than that of unfavourable brand loyalty.

11. Findings

(i) Brand awareness level is 100% in case of Lakme and Revlon.

(ii) Consumer expectations in terms of younger look, good appearance, attractive look and fashionable are equally distributed in case of cosmetics in Hyderabad.

(iii) Brand Loyalty is independent of age group in the industry.

(iv) There is significant preference for a particular brand among users and non-users in Hyderabad.

12. Conclusion

Brand familiarity is very high for global brands such as Lakme, Revlon, Elle 18 and Maybelline in Hyderabad and it is marked 100% familiarity in case of Lakme and Revlon. The brands meet consumer expectations such as fairness, younger and attractive look, fashionable, and good appearance. So, customers do not want to change their brand. Hence, Brand Loyalty is high in case of color cosmetics. Majority of the consumers are very favorable to Lakme and Revlon brands. It can be concluded that the image of the cosmetics brands such as Lakme and Revlon is positive and very high.

13. References

Aaker, D. (1991), “Managing Brand Equity”, the free press, New York.Berk Ataman, Burç Ülengin, (2003),"A note on the effect of Brand Image on Sales", Journal of Product & Brand Management, 12 (4), pp. 237 – 250. Laetitia Radder, Wei Huang, (2008),"High-involvement and low-involvement products: A comparison of brand awareness among students at a South African university", Journal of Fashion Marketing and Management, 12(2), pp. 232 – 243. Sirgy, MJ (1982), “Self-Concept in Consumer Behavior: A Critical Review”, Journal of Consumer Research, 9, December, pp. 287-300.Gupta S P(2008), Statistical Methods, Sultan Chand & Sons, 37th editionKotler P (2007), Marketing Management, Pearson,

th12 editionSimon Pitman, India color cosmetics market predicted as big growth market, ath t t p : / / w w w. c o s m e t i c s d e s i g n . c o m / Pr o d u c t s -Markets/India-color-cosmetics-market-predicted-as-big-growth-market, assessed on 12.01.2011.

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 35

Brand Image Analysis: A Study on Cosmetics in Hyderabad

Not Favored Favored Total

Below 25 years 15 43 58

Above 25 years 10 32 42

Total 25 75 100

ABSTRACT

On the basis of the survey of 71 persons, the study finds that the employee perception of empowerment as

well as engagement varies significantly across employee age, sex, length of experience and nature of

organisation. Moreover, it was found that empowerment and engagement are significantly correlated.

findings suggests that employee-empowerment and employee-engagement are mutually reinforcing

strategies of human resource management

1. Introduction

Employee empowerment and engagement presents a great challenge and opportunity for the human resource (HR) managers and consultants. It is generally believed that empowered and engaged employees contribute effectively towards organisational purpose. On the other hand, a culture of empowerment and engagement contributes towards meaningful work and life experiences. Despite their apparent importance, the academic literature on these concepts is still in its infancy and empirical research is even more scant. The purpose of this paper is to review the development of these concepts and discuss some perceptual data on employee empowerment and engagement in Indian organisations. In particular, the paper addresses the following questions.

1. How have employee empowerment and engagement been conceptualised?

2. What are the constituent elements of employee empowerment and engagement?

3. How do individual and organisational differences relate to employee empowerment and engagement?

4. How does employee empowerment relate to employee engagement?

1.1 Concepts

Friedman (1960) said that there is no point in making the definitions of the terms more precise than the subject matter these refer to. However, until the terms are defined and measured, one cannot manage these, nor can one know whether the efforts to improve these are bearing fruit (Ferguson, 2007). Thus, conceptual clarity may be regarded as the edifice of empirical design.

1.2 Employee Empowerment

Webster ’s dictionary (1971) defines the term empowerment as follows: “to give official authority to: delegate legal power to: commission, authorize.” Conger and Kanungo, (1988), defined empowerment as the process of enhancing feelings of self-efficiency among organizational members through the identification of conditions that foster powerlessness and through their removal by formal organizational practices and informal techniques of providing effective information. Gandz (1990) defines that, "Empowerment means that management vests decision-making or approval authority in employees where, traditionally, such authority was a managerial prerogative." Thomas and Venthous (1990), emphasise that empowerment gives people the motivation to improve. Thus, empowerment involves those processes which make people motivated. Zimmerman (1990) states that it is easier to define empowerment in its absence - alienation, powerless, helplessness - but difficult to define positively because it “takes on a different form in different people and contexts”. According to Handy (1993) Empowerment simply means encouraging people to make decisions and initiate actions with less control and direction from their manager. Gupta (1999) defines empowerment as a process of sharing power and providing an enabling environment (by removing hurdles) in order to encourage employee to take initiative and decisions to achieve organizational and individual goals.

A review of the foregoing definitions of the term empowerment implies organisational action, personal affect and managers’ tendencies toward power sharing, decentralisation of decision-making and enhancement of personal freedom and discretion of the employees with a

Employees’ Perceptions on Empowerment and Engagement

Virender Kumar Arora*

* Assistant Professor, Padmasri Dr B V Raju Institute of Technology, Vishnupur, Narsapur, Medak District, Andhra Pradesh, India.

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 201236

Employees’ Perceptions on Empowerment and Engagement

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 37

view to encouraging initiative and the benefit of taking the decision to the level of its implementation. Clearly, it is a multifaceted concept. Gupta and Murari (2001) identified ten characteristics or factors that underlie the concept of employee empowerment (see figure 1).

Fig. 1: Factors in Employee EmpowermentSource: Adapted from Gupta and Murari (2001)

It is evident from Figure-1 the concept of employee empowerment, while of necessity, involves the enhancement of the autonomy of the individual employees, yet it goes much beyond the ideas of delegation and decentralisation and is endowed with the notions of development of the employee’s feelings of being valued contributors to organisational performance. It involves the creation of a working environment where an employee is allowed to make his own decisions in specific work related situations. The decisions can be big or small in size and effect of the decision is up to the employer. The logic behind the employee empowerment is to increase the employee’s responsibility, to build employee morale and to improve the quality of employee’s work life. Employee empowerment makes employee more protective, loyal and more confident.

1.3 Employee Engagement

Webster’s dictionary defines "engaged employee" is one who is fully involved in, and enthusiastic about their work, and thus will act in a way that furthers their organization's interests. Kahn (1990) defines employee engagement as “the harnessing of organization members’ selves to their work roles; in engagement, people employ and express themselves physically, cognitively, and emotionally during role performances”. The cognitive aspect of employee engagement concerns employees’ beliefs about the organisation, its leaders and working conditions. The emotional aspect concerns how employees feel about each of those three factors and whether they have positive

or negative attitudes toward the organisation and its leaders. The physical aspect of employee engagement concerns the physical energies exerted by individuals to accomplish their roles. Thus, according to Kahn (1990), engagement means to be psychologically as well as physically present when occupying and performing an organisational role. Baumruk (2004), Shaw (2005) and Richman (2006) define employee engagement as emotional and intellectual commitment to the organisation. Frank et al. (2004) define it with respect to the amount of discretionary effort exhibited by employees in their job. Truss et al. (2006) define employee engagement simply as ‘passion for work’, a psychological state. Robinson et al. (2004) infer the semantic similarly of employee engagement with the existing ideas of ‘job-involvement,’ ‘organisational commitment’ and ‘organisational citizenship behaviour (OCB)’ and defined engagement as ‘one step up from commitment’. He identified several indicators of a fully engaged employee, viz. he is intellectually and emotionally bound with the organization; gives 100 percent; feels passionately about its goals and is committed to live by its values. This employee goes beyond the basic job responsibility to delight the customers and drive the business forward. Robinson Perryman and Hayday (2004) described the factors of employee engagement and stated a strong link between feelings valued, involved and engagement. According to them the factors of employee engagement are common to all organisations. See Figure 2.

Fig. 2: Factors in Employee Engagement

Source: Adopted from Robinson D, Perryman S, Hayday S (2004)

It is important to take note of some salient similarities and differences between the concepts of employee empowerment and employee engagement. First the similarities: Both the concepts can be examined from multiple perspectives: structural, beahvioural and psychological. The concepts are comparable even on the

ABSTRACT

On the basis of the survey of 71 persons, the study finds that the employee perception of empowerment as

well as engagement varies significantly across employee age, sex, length of experience and nature of

organisation. Moreover, it was found that empowerment and engagement are significantly correlated.

findings suggests that employee-empowerment and employee-engagement are mutually reinforcing

strategies of human resource management

1. Introduction

Employee empowerment and engagement presents a great challenge and opportunity for the human resource (HR) managers and consultants. It is generally believed that empowered and engaged employees contribute effectively towards organisational purpose. On the other hand, a culture of empowerment and engagement contributes towards meaningful work and life experiences. Despite their apparent importance, the academic literature on these concepts is still in its infancy and empirical research is even more scant. The purpose of this paper is to review the development of these concepts and discuss some perceptual data on employee empowerment and engagement in Indian organisations. In particular, the paper addresses the following questions.

1. How have employee empowerment and engagement been conceptualised?

2. What are the constituent elements of employee empowerment and engagement?

3. How do individual and organisational differences relate to employee empowerment and engagement?

4. How does employee empowerment relate to employee engagement?

1.1 Concepts

Friedman (1960) said that there is no point in making the definitions of the terms more precise than the subject matter these refer to. However, until the terms are defined and measured, one cannot manage these, nor can one know whether the efforts to improve these are bearing fruit (Ferguson, 2007). Thus, conceptual clarity may be regarded as the edifice of empirical design.

1.2 Employee Empowerment

Webster ’s dictionary (1971) defines the term empowerment as follows: “to give official authority to: delegate legal power to: commission, authorize.” Conger and Kanungo, (1988), defined empowerment as the process of enhancing feelings of self-efficiency among organizational members through the identification of conditions that foster powerlessness and through their removal by formal organizational practices and informal techniques of providing effective information. Gandz (1990) defines that, "Empowerment means that management vests decision-making or approval authority in employees where, traditionally, such authority was a managerial prerogative." Thomas and Venthous (1990), emphasise that empowerment gives people the motivation to improve. Thus, empowerment involves those processes which make people motivated. Zimmerman (1990) states that it is easier to define empowerment in its absence - alienation, powerless, helplessness - but difficult to define positively because it “takes on a different form in different people and contexts”. According to Handy (1993) Empowerment simply means encouraging people to make decisions and initiate actions with less control and direction from their manager. Gupta (1999) defines empowerment as a process of sharing power and providing an enabling environment (by removing hurdles) in order to encourage employee to take initiative and decisions to achieve organizational and individual goals.

A review of the foregoing definitions of the term empowerment implies organisational action, personal affect and managers’ tendencies toward power sharing, decentralisation of decision-making and enhancement of personal freedom and discretion of the employees with a

Employees’ Perceptions on Empowerment and Engagement

Virender Kumar Arora*

* Assistant Professor, Padmasri Dr B V Raju Institute of Technology, Vishnupur, Narsapur, Medak District, Andhra Pradesh, India.

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 201236

Employees’ Perceptions on Empowerment and Engagement

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 37

view to encouraging initiative and the benefit of taking the decision to the level of its implementation. Clearly, it is a multifaceted concept. Gupta and Murari (2001) identified ten characteristics or factors that underlie the concept of employee empowerment (see figure 1).

Fig. 1: Factors in Employee EmpowermentSource: Adapted from Gupta and Murari (2001)

It is evident from Figure-1 the concept of employee empowerment, while of necessity, involves the enhancement of the autonomy of the individual employees, yet it goes much beyond the ideas of delegation and decentralisation and is endowed with the notions of development of the employee’s feelings of being valued contributors to organisational performance. It involves the creation of a working environment where an employee is allowed to make his own decisions in specific work related situations. The decisions can be big or small in size and effect of the decision is up to the employer. The logic behind the employee empowerment is to increase the employee’s responsibility, to build employee morale and to improve the quality of employee’s work life. Employee empowerment makes employee more protective, loyal and more confident.

1.3 Employee Engagement

Webster’s dictionary defines "engaged employee" is one who is fully involved in, and enthusiastic about their work, and thus will act in a way that furthers their organization's interests. Kahn (1990) defines employee engagement as “the harnessing of organization members’ selves to their work roles; in engagement, people employ and express themselves physically, cognitively, and emotionally during role performances”. The cognitive aspect of employee engagement concerns employees’ beliefs about the organisation, its leaders and working conditions. The emotional aspect concerns how employees feel about each of those three factors and whether they have positive

or negative attitudes toward the organisation and its leaders. The physical aspect of employee engagement concerns the physical energies exerted by individuals to accomplish their roles. Thus, according to Kahn (1990), engagement means to be psychologically as well as physically present when occupying and performing an organisational role. Baumruk (2004), Shaw (2005) and Richman (2006) define employee engagement as emotional and intellectual commitment to the organisation. Frank et al. (2004) define it with respect to the amount of discretionary effort exhibited by employees in their job. Truss et al. (2006) define employee engagement simply as ‘passion for work’, a psychological state. Robinson et al. (2004) infer the semantic similarly of employee engagement with the existing ideas of ‘job-involvement,’ ‘organisational commitment’ and ‘organisational citizenship behaviour (OCB)’ and defined engagement as ‘one step up from commitment’. He identified several indicators of a fully engaged employee, viz. he is intellectually and emotionally bound with the organization; gives 100 percent; feels passionately about its goals and is committed to live by its values. This employee goes beyond the basic job responsibility to delight the customers and drive the business forward. Robinson Perryman and Hayday (2004) described the factors of employee engagement and stated a strong link between feelings valued, involved and engagement. According to them the factors of employee engagement are common to all organisations. See Figure 2.

Fig. 2: Factors in Employee Engagement

Source: Adopted from Robinson D, Perryman S, Hayday S (2004)

It is important to take note of some salient similarities and differences between the concepts of employee empowerment and employee engagement. First the similarities: Both the concepts can be examined from multiple perspectives: structural, beahvioural and psychological. The concepts are comparable even on the

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 201238

basis of antecedents as well as consequences. The important difference however lies with regard to their relative age in the organisational / management lexicon and therefore the clarity with which the two terms may be uniquely and discriminatively defined. While, the literature on employee empowerment is relatively more certain about the manner in which the concept is operastionalised, the same cannot be said of employee engagement. The latter term is still discussed with reference to the ideas of the psychological states of job involvement, employee commitment and behavioural aspects of organisational citizenship behaviour (OCB) etc. In fact, the critical difference between the two terms lies in their respective origin. Whereas the idea of empowerment is traceable to relational structure and distribution of power across the organisation, the concept of engagement is more of a psychological and behavioural origin.

2. Review of Literature

As noted at the outset, academic literature on the two concepts, more so in case of employee engagement is scant, albeit growing. Yet, in line with the purpose of the study I have attempted to put together the available literature along three strands: meaning, antecedents and consequences of employee empowerment (hereinafter employee empowerment); meaning, antecedents and consequences of employee engagement (hereinafter engagement); and, three relationships between the concepts of employee empowerment and employee engagement. In presenting the studies reviewed here, however, we have had regard to their chronological order.

2.1 Empowerment

The notion of employee empowerment may be traced to the classical theory (1890-1930) of management where Fayol (1917) defined centralisation as everything that goes on to increasing the power of the superior and decentralisation as increasing the power of the subordinates. The idea grew with the human relations and behavioural schools of Neo-classical management (1915-1990s). Mary Parker Follett (1924) distinguished between “power-with” and “power-over” and suggested the process of integration to increase power-with while decreasing power-over. The human relations movement (1930) had a great impact on employee empowerment. The Hawthorne studies (1920) concluded that the workers were more responsive to social situations than to management controls.

Now a days, empowerment is the center of attention in 21 century’s organization. It is argued that if employee-

empowerment is managed correctly, it can cause enhancement in organizational commitment and reduction of employee’s replacement. Empowerment with confidence, making participation in decision making, and elimination of the border line between management and employee, cause increase of productivity, performance and job satisfaction.

Klagge J. (1998) views empowerment in terms of improved distribution of “power and authority” along with the relevant duties and expertise to employees.

Randolph (1995) defines employee empowerment as “a transfer of power” from the employer to the employees. Blanchard et al. (1996) argued that empowerment is not only having the freedom to act, but also having higher degree of responsibility and accountability. This indicates that management must empower their employees so that they can be motivated, committed, satisfied and assist the organization in achieving its objectives. Nick et al. (1994) too associate employee empowerment with the concept of power, implying that power in organization should be re-shared from the top management to the lower management.

Mohammed et al. (1998) interpret the term from the perspective of those empowered and regard it as a state of mind. An employee with an empowered state of mind experiences feelings of 1) control over the job to be performed, 2) awareness of the context in which the work is performed, 3) accountability for personal work output, 4) shared responsibility for unit and organizational performance, and 5) equity in the rewards based on individual and collective performance. Rodwell (1996), Hage and Lorensen (2005) label empowerment as an “enabling process.” Thus an important strand of research on empowerment has been the focus on groups that are typically considered disadvantaged, disempowered or ostensibly powerless.

During the 1990s writers claimed that the shift in the way organizations treated their employees was the “empowerment era”. It has been seen that the research on the study of empowerment so far had been primarily through the relational approach or the motivational approach. The relational approach, based on management practices, focuses on the delegation of power and decision making authority. According to this approach, empowerment was based on the movement of power down an organization’s hierarchy (Menon, 2001) where sources of power could be legal (control of office); normative (control of symbolic rewards); remunerative (control of material rewards); coercive (control of punishment); and/or knowledge/expertise. The

Employees’ Perceptions on Empowerment and Engagement

motivational approach stressed psychological enabling as the main reason for an individual’s feelings of empowerment. Because the conceptual and operational definitions of empowerment often differ from study to study, more research is needed to better articulate the homological net of the construct of empowerment.

Conger and Kanungo (1988) have defined empowerment in at least two ways: the situational approach and the psychological approach. On one hand, the situational approach concerns passing power from higher-level management to employees by involving them in decision making. This approach is also known as relational or management practice approach. On the other hand, the psychological approach puts less emphasis on delegation of decision-making. Instead, this approach stresses motivational processes in workers. The psychological approach views empowerment as various psychological cognitions that contribute to enhanced intrinsic motivation.

Proponents of the psychological perspective of empowerment have agreed that there are multiple dimensions of employee empowerment explain that the psychological cognitions of employee empowerment include meaningfulness, competence, choice, and impact. More recently, Petter et al (2002) suggested that there were seven dimensions of employee empowerment and that included power, decision-making, information, autonomy, initiative and creativity, knowledge and skills, and responsibility.

2.2 Engagement

Whilst discussing the concept of employee engagement it has been seen that it has evolved and continues to do so in the realms of psychological states and behavioural orientations. In this regard, the terms ‘organizational commitment’ and ‘job involvement’ may be forwarded as the two important strands of traceability of employee engagement.

Mowday et al. (1979) defined organizational commitment as an individual's (1) belief in and acceptance of organizational goals and values, (2) willingness to exert effort toward organizational goal accomplishment, and (3) strong desire to maintain organizational membership. (Becker, 1992; O'Reilly & Chatman, 1986; Reichers, 1985, 1986) have developed this concept to imply employee attachment resulting from, or based on, an employee's compliance (conformity driven by rewards and punishments), identification (a desire for affiliation), and internalization (individual values' congruence with organizational goals and values). Reichers (1985) argued

that the ‘organization’ in organizational commitment should not be viewed as "a monolithic, undifferentiated entity that elicits an identification and attachment on the part of individuals." Thus, the discourse on the idea of organisational commitment as a precursor to the development of the concept of employee- engagement was shaped further by the advocacy of the multiple commitments view (Ashforth & Mael, 1989; Cohen, 1993; Randall, 1990; Reichers, 1985, 1986). Hunt and Morgan (1994) view an organisational as a coalition of various constituencies and, therefore, argued that "organizational commitment can be accurately understood as a collection of multiple commitments to various groups that comprise the organization". It is not surprising therefore that while defining employee engagement, reference to support from/ commitment to the top management, immediate supervisor/ superior and peers are often forwarded as the important organisational antecedents as well as behavioural implications of employee engagement besides commitment to organisational purpose and values.

The other important strand in the development of the concept of employee –engagement has been the idea of job- involvement. Badawy (1994) reported that involvement plays an important role in the pattern of relationships of work experiences as well as of job characteristics with career expectations and career outcomes. This study shows that employee engagement positively impacts quality of work life perceptions of the employees in terms of their work experience, career expectation and outcomes.

The ideas of ‘commitment’ and ‘involvement’ as the critical building blocks of the concept of employee engagement assume further importance in view of their behavioural implications as well. For example, Mc Farlane (1995) distinguishes between ‘affective’ and ‘continuance’ commitment to underline the psychological and behavioural implications of the concept of employee commitment. The author reports further that affective commitment is positively and continuance commitment negatively related to outcomes, managerial potential and promo ability in the organisation. Mayer and Schoorman (1998) found that organizational tenure, retirement benefits, education, and age are more highly correlate with continuance engagement, while feeling of participation, perceive prestige, job involvement, and role ambiguity are more highly correlate with value/ affective engagement

Lee and Olshfski (2001) attempted to integrate the affective and behavioural dimensions in the employee engagement by providing a four-dimensional framework:

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 39

Employees’ Perceptions on Empowerment and Engagement

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 201238

basis of antecedents as well as consequences. The important difference however lies with regard to their relative age in the organisational / management lexicon and therefore the clarity with which the two terms may be uniquely and discriminatively defined. While, the literature on employee empowerment is relatively more certain about the manner in which the concept is operastionalised, the same cannot be said of employee engagement. The latter term is still discussed with reference to the ideas of the psychological states of job involvement, employee commitment and behavioural aspects of organisational citizenship behaviour (OCB) etc. In fact, the critical difference between the two terms lies in their respective origin. Whereas the idea of empowerment is traceable to relational structure and distribution of power across the organisation, the concept of engagement is more of a psychological and behavioural origin.

2. Review of Literature

As noted at the outset, academic literature on the two concepts, more so in case of employee engagement is scant, albeit growing. Yet, in line with the purpose of the study I have attempted to put together the available literature along three strands: meaning, antecedents and consequences of employee empowerment (hereinafter employee empowerment); meaning, antecedents and consequences of employee engagement (hereinafter engagement); and, three relationships between the concepts of employee empowerment and employee engagement. In presenting the studies reviewed here, however, we have had regard to their chronological order.

2.1 Empowerment

The notion of employee empowerment may be traced to the classical theory (1890-1930) of management where Fayol (1917) defined centralisation as everything that goes on to increasing the power of the superior and decentralisation as increasing the power of the subordinates. The idea grew with the human relations and behavioural schools of Neo-classical management (1915-1990s). Mary Parker Follett (1924) distinguished between “power-with” and “power-over” and suggested the process of integration to increase power-with while decreasing power-over. The human relations movement (1930) had a great impact on employee empowerment. The Hawthorne studies (1920) concluded that the workers were more responsive to social situations than to management controls.

Now a days, empowerment is the center of attention in 21 century’s organization. It is argued that if employee-

empowerment is managed correctly, it can cause enhancement in organizational commitment and reduction of employee’s replacement. Empowerment with confidence, making participation in decision making, and elimination of the border line between management and employee, cause increase of productivity, performance and job satisfaction.

Klagge J. (1998) views empowerment in terms of improved distribution of “power and authority” along with the relevant duties and expertise to employees.

Randolph (1995) defines employee empowerment as “a transfer of power” from the employer to the employees. Blanchard et al. (1996) argued that empowerment is not only having the freedom to act, but also having higher degree of responsibility and accountability. This indicates that management must empower their employees so that they can be motivated, committed, satisfied and assist the organization in achieving its objectives. Nick et al. (1994) too associate employee empowerment with the concept of power, implying that power in organization should be re-shared from the top management to the lower management.

Mohammed et al. (1998) interpret the term from the perspective of those empowered and regard it as a state of mind. An employee with an empowered state of mind experiences feelings of 1) control over the job to be performed, 2) awareness of the context in which the work is performed, 3) accountability for personal work output, 4) shared responsibility for unit and organizational performance, and 5) equity in the rewards based on individual and collective performance. Rodwell (1996), Hage and Lorensen (2005) label empowerment as an “enabling process.” Thus an important strand of research on empowerment has been the focus on groups that are typically considered disadvantaged, disempowered or ostensibly powerless.

During the 1990s writers claimed that the shift in the way organizations treated their employees was the “empowerment era”. It has been seen that the research on the study of empowerment so far had been primarily through the relational approach or the motivational approach. The relational approach, based on management practices, focuses on the delegation of power and decision making authority. According to this approach, empowerment was based on the movement of power down an organization’s hierarchy (Menon, 2001) where sources of power could be legal (control of office); normative (control of symbolic rewards); remunerative (control of material rewards); coercive (control of punishment); and/or knowledge/expertise. The

Employees’ Perceptions on Empowerment and Engagement

motivational approach stressed psychological enabling as the main reason for an individual’s feelings of empowerment. Because the conceptual and operational definitions of empowerment often differ from study to study, more research is needed to better articulate the homological net of the construct of empowerment.

Conger and Kanungo (1988) have defined empowerment in at least two ways: the situational approach and the psychological approach. On one hand, the situational approach concerns passing power from higher-level management to employees by involving them in decision making. This approach is also known as relational or management practice approach. On the other hand, the psychological approach puts less emphasis on delegation of decision-making. Instead, this approach stresses motivational processes in workers. The psychological approach views empowerment as various psychological cognitions that contribute to enhanced intrinsic motivation.

Proponents of the psychological perspective of empowerment have agreed that there are multiple dimensions of employee empowerment explain that the psychological cognitions of employee empowerment include meaningfulness, competence, choice, and impact. More recently, Petter et al (2002) suggested that there were seven dimensions of employee empowerment and that included power, decision-making, information, autonomy, initiative and creativity, knowledge and skills, and responsibility.

2.2 Engagement

Whilst discussing the concept of employee engagement it has been seen that it has evolved and continues to do so in the realms of psychological states and behavioural orientations. In this regard, the terms ‘organizational commitment’ and ‘job involvement’ may be forwarded as the two important strands of traceability of employee engagement.

Mowday et al. (1979) defined organizational commitment as an individual's (1) belief in and acceptance of organizational goals and values, (2) willingness to exert effort toward organizational goal accomplishment, and (3) strong desire to maintain organizational membership. (Becker, 1992; O'Reilly & Chatman, 1986; Reichers, 1985, 1986) have developed this concept to imply employee attachment resulting from, or based on, an employee's compliance (conformity driven by rewards and punishments), identification (a desire for affiliation), and internalization (individual values' congruence with organizational goals and values). Reichers (1985) argued

that the ‘organization’ in organizational commitment should not be viewed as "a monolithic, undifferentiated entity that elicits an identification and attachment on the part of individuals." Thus, the discourse on the idea of organisational commitment as a precursor to the development of the concept of employee- engagement was shaped further by the advocacy of the multiple commitments view (Ashforth & Mael, 1989; Cohen, 1993; Randall, 1990; Reichers, 1985, 1986). Hunt and Morgan (1994) view an organisational as a coalition of various constituencies and, therefore, argued that "organizational commitment can be accurately understood as a collection of multiple commitments to various groups that comprise the organization". It is not surprising therefore that while defining employee engagement, reference to support from/ commitment to the top management, immediate supervisor/ superior and peers are often forwarded as the important organisational antecedents as well as behavioural implications of employee engagement besides commitment to organisational purpose and values.

The other important strand in the development of the concept of employee –engagement has been the idea of job- involvement. Badawy (1994) reported that involvement plays an important role in the pattern of relationships of work experiences as well as of job characteristics with career expectations and career outcomes. This study shows that employee engagement positively impacts quality of work life perceptions of the employees in terms of their work experience, career expectation and outcomes.

The ideas of ‘commitment’ and ‘involvement’ as the critical building blocks of the concept of employee engagement assume further importance in view of their behavioural implications as well. For example, Mc Farlane (1995) distinguishes between ‘affective’ and ‘continuance’ commitment to underline the psychological and behavioural implications of the concept of employee commitment. The author reports further that affective commitment is positively and continuance commitment negatively related to outcomes, managerial potential and promo ability in the organisation. Mayer and Schoorman (1998) found that organizational tenure, retirement benefits, education, and age are more highly correlate with continuance engagement, while feeling of participation, perceive prestige, job involvement, and role ambiguity are more highly correlate with value/ affective engagement

Lee and Olshfski (2001) attempted to integrate the affective and behavioural dimensions in the employee engagement by providing a four-dimensional framework:

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 39

Employees’ Perceptions on Empowerment and Engagement

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 201240

(1) commitment to boss (2) commitment to working group (3) commitment to organization and (4) feeling of honour in job which makes them realize that they are performing a valuable service to the community. Vazirani (2007) define it as a barometer of association between the employee and the organization.

2.3 Relationship between Employee Empowerment and Engagement

The studies on the relationship between employee empowerment and engagement are conspicuous by their absence despite the fact that conceptually both the concepts might be integrated with reference to antecedents and consequences, personal and organisational (constituencies as well as the whole). Kanter (1977, 1993) posits that employee empowerment might lead to employee-engagement related consequences. The author argues that the absence of empowering structures might be responsible for disengaged employees and lower employee commitment. Masalach and Leiter (1997) propose that the fit between employees and their work environments results in greater engagement in their work and lower levels of burnout. Chop et al. (2006) integrate Kanter’s theory of work empowerment and Masalach and Leiter’s work engagement/ burnout model to examine the relationship between employee-empowerment and employee-engagement. Gupta and Murari (2001) note that empowerment processes have positive co-relationship with commitment/ engagement. As for the antecedents, demographic factors especially age, experience, education and have significant effect on both commitment and empowerment albeit highly educated persons feel less empowered and committed. Whether Gupta and Murari (2001) or Chop et al. (2006), both the studies examine the relationship between the two terms in a one-way framework, i.e. the impact of empowering structures on the feeling of engagement. In the model proposed in the study, we posit the possibility of mutually reinforcing relationship between the two terms.

3. Methodology

Basic design of the study is the survey of employees. As such the study relies on primary data.

4. Model of the Study

The study essentially pertains to the discussion of the extent of employee empowerment and employee engagement in Indian organisations. The model of the study seeks to provide an eclectic perspective on antecedents, the

conduct (the act or process of employee empowerment and engagement) and the outcomes. See Figure – 3

Figure 3 : Process of Employee Empowerment and Engagement

5. Scope

While the model of the study articulates an eclectic view of the concepts of employee empowerment and engagement, the scope of the present paper is limited to a discussion of the perceptions of employees on these two counts. In analysing their perceptions, we invoke individual and organisational antecedents with a view to understanding what type of individuals and organisations are more likely candidates for these interrelated paradigms of modern management.

6. Variables

Employee empowerment and employee engagement comprise of the dependent variables of the study. In this paper, each of the two variables is measured with respect to three-dimensions. Employee engagement is measured with respect to ‘enjoyable work’; ‘pleasant relations at work’; and, ‘feeling of pride about of the organizations.’ Employee empowerment is measured with respect to ‘opportunity for training, development and growth’; ‘participation in decision making’; and, ‘free and frank communication among different levels’. The respondents were asked a question apiece in respect of each of the dimensions. They were asked to assign a score from 0-10 to each of the statements comprising the questions. Anticipating that their responses could be influenced by their personal and organizational characteristics, five such dimensions, viz., Age, Sex, Nature of present organisation, Nature of previous organisation and Length of experience comprise of the independent variables of the study.

Employees’ Perceptions on Empowerment and Engagement

7. Data Capture Instrument

A specially designed questionnaire has been used for collection of Primary data for the purposes of the study. Questionnaire has two parts. Part – 1 elicits background information about the respondents and their organisations, viz., including name, age, sex, contact detail, name of the present and previous organisations, and experience etc. Part- 2 contained questions on engagement and empowerment. For the purposes of this paper, I focused on the responses to the questions pertaining to three-dimensions each of employee empowerment and employee engagement.

8. Sample

The study relies on snowball sampling, i.e. the persons in personal contact of the researcher were requested to make available the contacts of other persons in their acquaintance who could be interested in the study. I approached about 150 persons of which 80 consented to participate. I interviewed them personally. Upon a subsequent examination of the responses, 9 questionnaires had to be discarded for further processing. Thus, the effective sample size of the study is 71 persons and represented an equal number of organisations. See Table 1 for an overview of the sample of the study.

Note: * Figures have been rounded off.

It is evident from Table 1 that the subjects of the study come from diverse demographic and organizational backgrounds Diversity of the backgrounds of the subjects is likely to provide useful insights into the findings of the study and their reliability across age, gender, nature of organization served and the length of work experience etc.

9. Statistical Techniques

Since the data used in the study is perceptual, I relied on non-parametric statistical methods. In particular, I have used Chi-Square test to examine whether or not the perceptions of the respondents vary across their backgrounds on the various dimensions of employee empowerment and employee engagement.

10. Findings

Extent of Employee Engagement The proportional distribution of the respondents so classified is given in Table

Table 2 shows that employees covered in the study enjoyed their work, had pleasant relations with their colleagues and felt proud of the organisations that they were working for. Such a situation augurs well for Indian organisations for engaged employees are regarded as critical for organizational effectiveness.

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 41

Employees’ Perceptions on Empowerment and Engagement

Table 1: Profile of the Respondents

Description Count Percentage *

Sex

Male 53 75

Female 18 25

Age

Up to 40 years (Younger)

43 61

Above 40 years (Older)

28 39

Nature of Present Organization

Government 43 61

Private 28 39

Nature of the Previous Organizations

Government 07 21

Private 26 79

Length of Work Experience

Less than 10 years (Less Experienced)

36 51

More than 10 years (Quite Experienced)

35 49

Description Count Percentage *

More than 10 years (Quite Experienced)

35 49

Number of Respondents

71 100

Number of Organizations

71 100

PersonalAntecedents

EmployeeEmpowerment

PersonalConsequences

EmployeeEngagement

OrganisationalAntecedents

OrganisationalConsequences

Table: 2 Extent of Engagement

Extent of Engagement(Enjoyed work; had pleasant relations at work; felt proud of their organizations)

Number of Respondents

Percentage*

Highly Engaged # 16 23

Not So Engaged ## 55 77

Total 71 100

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 201240

(1) commitment to boss (2) commitment to working group (3) commitment to organization and (4) feeling of honour in job which makes them realize that they are performing a valuable service to the community. Vazirani (2007) define it as a barometer of association between the employee and the organization.

2.3 Relationship between Employee Empowerment and Engagement

The studies on the relationship between employee empowerment and engagement are conspicuous by their absence despite the fact that conceptually both the concepts might be integrated with reference to antecedents and consequences, personal and organisational (constituencies as well as the whole). Kanter (1977, 1993) posits that employee empowerment might lead to employee-engagement related consequences. The author argues that the absence of empowering structures might be responsible for disengaged employees and lower employee commitment. Masalach and Leiter (1997) propose that the fit between employees and their work environments results in greater engagement in their work and lower levels of burnout. Chop et al. (2006) integrate Kanter’s theory of work empowerment and Masalach and Leiter’s work engagement/ burnout model to examine the relationship between employee-empowerment and employee-engagement. Gupta and Murari (2001) note that empowerment processes have positive co-relationship with commitment/ engagement. As for the antecedents, demographic factors especially age, experience, education and have significant effect on both commitment and empowerment albeit highly educated persons feel less empowered and committed. Whether Gupta and Murari (2001) or Chop et al. (2006), both the studies examine the relationship between the two terms in a one-way framework, i.e. the impact of empowering structures on the feeling of engagement. In the model proposed in the study, we posit the possibility of mutually reinforcing relationship between the two terms.

3. Methodology

Basic design of the study is the survey of employees. As such the study relies on primary data.

4. Model of the Study

The study essentially pertains to the discussion of the extent of employee empowerment and employee engagement in Indian organisations. The model of the study seeks to provide an eclectic perspective on antecedents, the

conduct (the act or process of employee empowerment and engagement) and the outcomes. See Figure – 3

Figure 3 : Process of Employee Empowerment and Engagement

5. Scope

While the model of the study articulates an eclectic view of the concepts of employee empowerment and engagement, the scope of the present paper is limited to a discussion of the perceptions of employees on these two counts. In analysing their perceptions, we invoke individual and organisational antecedents with a view to understanding what type of individuals and organisations are more likely candidates for these interrelated paradigms of modern management.

6. Variables

Employee empowerment and employee engagement comprise of the dependent variables of the study. In this paper, each of the two variables is measured with respect to three-dimensions. Employee engagement is measured with respect to ‘enjoyable work’; ‘pleasant relations at work’; and, ‘feeling of pride about of the organizations.’ Employee empowerment is measured with respect to ‘opportunity for training, development and growth’; ‘participation in decision making’; and, ‘free and frank communication among different levels’. The respondents were asked a question apiece in respect of each of the dimensions. They were asked to assign a score from 0-10 to each of the statements comprising the questions. Anticipating that their responses could be influenced by their personal and organizational characteristics, five such dimensions, viz., Age, Sex, Nature of present organisation, Nature of previous organisation and Length of experience comprise of the independent variables of the study.

Employees’ Perceptions on Empowerment and Engagement

7. Data Capture Instrument

A specially designed questionnaire has been used for collection of Primary data for the purposes of the study. Questionnaire has two parts. Part – 1 elicits background information about the respondents and their organisations, viz., including name, age, sex, contact detail, name of the present and previous organisations, and experience etc. Part- 2 contained questions on engagement and empowerment. For the purposes of this paper, I focused on the responses to the questions pertaining to three-dimensions each of employee empowerment and employee engagement.

8. Sample

The study relies on snowball sampling, i.e. the persons in personal contact of the researcher were requested to make available the contacts of other persons in their acquaintance who could be interested in the study. I approached about 150 persons of which 80 consented to participate. I interviewed them personally. Upon a subsequent examination of the responses, 9 questionnaires had to be discarded for further processing. Thus, the effective sample size of the study is 71 persons and represented an equal number of organisations. See Table 1 for an overview of the sample of the study.

Note: * Figures have been rounded off.

It is evident from Table 1 that the subjects of the study come from diverse demographic and organizational backgrounds Diversity of the backgrounds of the subjects is likely to provide useful insights into the findings of the study and their reliability across age, gender, nature of organization served and the length of work experience etc.

9. Statistical Techniques

Since the data used in the study is perceptual, I relied on non-parametric statistical methods. In particular, I have used Chi-Square test to examine whether or not the perceptions of the respondents vary across their backgrounds on the various dimensions of employee empowerment and employee engagement.

10. Findings

Extent of Employee Engagement The proportional distribution of the respondents so classified is given in Table

Table 2 shows that employees covered in the study enjoyed their work, had pleasant relations with their colleagues and felt proud of the organisations that they were working for. Such a situation augurs well for Indian organisations for engaged employees are regarded as critical for organizational effectiveness.

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 41

Employees’ Perceptions on Empowerment and Engagement

Table 1: Profile of the Respondents

Description Count Percentage *

Sex

Male 53 75

Female 18 25

Age

Up to 40 years (Younger)

43 61

Above 40 years (Older)

28 39

Nature of Present Organization

Government 43 61

Private 28 39

Nature of the Previous Organizations

Government 07 21

Private 26 79

Length of Work Experience

Less than 10 years (Less Experienced)

36 51

More than 10 years (Quite Experienced)

35 49

Description Count Percentage *

More than 10 years (Quite Experienced)

35 49

Number of Respondents

71 100

Number of Organizations

71 100

PersonalAntecedents

EmployeeEmpowerment

PersonalConsequences

EmployeeEngagement

OrganisationalAntecedents

OrganisationalConsequences

Table: 2 Extent of Engagement

Extent of Engagement(Enjoyed work; had pleasant relations at work; felt proud of their organizations)

Number of Respondents

Percentage*

Highly Engaged # 16 23

Not So Engaged ## 55 77

Total 71 100

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 201242

Notes: * Figures have been rounded-off# Based upon the score of above 20 out of a total 30## Based upon the score of below 20 out of a total 30

How does the extent of employee engagement vary across the personal and organizational characteristics? For this, let us turn our attention to Tables 3 to 6

Pearson Chi-Square value = 4.506 - Significant at 5%

Note: Figures in parentheses indicate percentages based on row totals.

Table 3 shows that male employees are highly engaged in their organisations either these are government or private as compared to female employees. 51% male employees score above 20.01 out of 30 whereas only 22% female employees score more than 20.01 out of 30. It shows that male employees enjoy their jobs. But if we see the overall situation irrespective of gender then the scenario has been totally changed. 40 (56%) out of 71 employees have low engagement. Its main reason is low engagement of female employees.

Pearson Chi-Square 7.994 - Significant at 5%

Table 4 shows the cross tabulation of Government and private employees and their engagement on their organisations. It shows that employees working in private

organisations (64%) are more engaged as compared to Government employees (36%). And overall only 44% employees are highly engaged in their organisations irrespective of type of organisations.Pearson Chi-Square value 1.187 - Not Significant

Table 5 shows the relationship between age and engagement of employees. Young Employee 49% (age between 21 -40) are more engaged as compared to older employees (age 41 & above).

Pearson Chi-Square value 8.72. - Significant at 5%

Table 6 shows the engagement level of employees on the basis of experience, employees who have experience less than 10 years are more engaged in their organisations as compared to employees having experience more than 10 years.

A perusal of Tables 3-6 shows that while to there was a significant variation (at 5%) to the extent of engagement on

Employees’ Perceptions on Empowerment and Engagement

Table 3: Variation in Employee Engagement by Sex of the Respondents

Sex:Male/Female

Total Engagement Total

LowEngagement

<= 20.00

High Engagement

20.01+

Male 26 (49%) 27 (51%) 53

Female 14 (78%) 4 (22%) 18

Total 40 31 71

Table 4: Variation in Employee Engagement by ownership of organisation (Government/Private)

of the Respondents

Organisation Government /

Private

Total Engagement Total

Government 43

Private 28

Total 71

Low Engagement

<= 20.00

High Engagement

20.01+

30 (70%) 13 (30%)

10 (36%) 18 (64%)

40 31

Table 5: Variation in Employee Engagement by Age of the Respondents

Age (in years) Total Engagement Total

Between21– 40 years

43

41years & above

28

Total 71

Low Engagement

<= 20.00

High Engagement

20.01+

22 (51%) 21(49%)

18 (64%) 10 (36%)

40 31

the basis of sex and age. However, as regards organisationally determined antecedents, on both the counts that is, experience in the organisation as well as its ownership structure the variation was observed to be significant. In general, out of the total number of respondents indicating higher engagement levels, males appear to be better represented in among the highly engaged respondents. Males and females differed significantly as regards their respective levels of engagement and so did the younger and older employees. Sex, ownership (Government/Private) were observed to be significant at 5%.

Table 7 shows that employees covered in the study have opportunities for training, development and growth; they participate in organisational decision making process and also have free and frank communication at different levels. This types of situation suits well for Indian organisations to empower their employees who are regarded as critical for organisational effectiveness.

Extent of Employee Empowerment

Notes: * Figures have been rounded-off# Based upon the score of above 20 out of a total 30## Based upon the score of below 20 out of a total 30

How does the extent of employee empowerment vary across the personal and organizational characteristics? For this, let us turn our attention to Tables 8 to 11.Pearson Chi-Square value 4.987. Significant at 5%.

A perusal of Table 8 shows that the variation in the extent of empowerment on the basis of Sex : Male/Female was observed to be significant at 5%.Male employees feel

more empowered whereas female employees feel low empowered.

Pearson Chi-Square value 6.543 - Significant at 5%.

A perusal of Table 9 show that the variation in the extent of empowermen t on the bas i s o f owne r sh ip Government/Private was observed to be significant at 5%. Employees in private sectors feel more empowered (50%) as compared to employees in government sector (21%).

Pearson Chi-Square value 4.461 - Significant at 5%.

A perusal of Table 10 show that the variation in the extent of empowerment on the basis of Age was observed to be significant at 5%. Young Employees having age in between

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 43

Employees’ Perceptions on Empowerment and Engagement

Table 6 Variation in Employee Engagement by Experience in present organisation of the

Respondents

Experience in present

organisation

Total Engagement Total

10- years or below

41

11- years & above

30

Total 71

Low<= 20.00

High20.01+

17(41%) 24(59%)

23(77%) 7(23%)

40 31

Table: 7 Extent of Empowerment

Extent of Empowerment(Opportunity for training development and growth, Employees participation in decision making, Free and frank communication among different levels)

Number of Respondents

Percentage*

High Empowerment # 23 32

Low Empowerment## 48 68

Total 71 100

Table 8: Variation in Employee Empowerment by Sex of the Respondents

Sex: Male/Female

Total Empowerment Total

Male 53

Female 18

Total 71

Low Empowerment

<= 20.00

High Empowerment

20.01+

32(60%) 21(40%)

16(89%) 2(11%)

48 23

Table 9 Variation in Employee Empowerment by ownership on organisation (Government/Private)

of the Respondents

Organisation Government

/Private

Total Empowerment Total

Government 43

Private 28

Total 71

Low Empowerment

<= 20.00

High Empowerment

20.01+

34(79%) 9(21%)

14(50%) 14(50%)

48 23

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 201242

Notes: * Figures have been rounded-off# Based upon the score of above 20 out of a total 30## Based upon the score of below 20 out of a total 30

How does the extent of employee engagement vary across the personal and organizational characteristics? For this, let us turn our attention to Tables 3 to 6

Pearson Chi-Square value = 4.506 - Significant at 5%

Note: Figures in parentheses indicate percentages based on row totals.

Table 3 shows that male employees are highly engaged in their organisations either these are government or private as compared to female employees. 51% male employees score above 20.01 out of 30 whereas only 22% female employees score more than 20.01 out of 30. It shows that male employees enjoy their jobs. But if we see the overall situation irrespective of gender then the scenario has been totally changed. 40 (56%) out of 71 employees have low engagement. Its main reason is low engagement of female employees.

Pearson Chi-Square 7.994 - Significant at 5%

Table 4 shows the cross tabulation of Government and private employees and their engagement on their organisations. It shows that employees working in private

organisations (64%) are more engaged as compared to Government employees (36%). And overall only 44% employees are highly engaged in their organisations irrespective of type of organisations.Pearson Chi-Square value 1.187 - Not Significant

Table 5 shows the relationship between age and engagement of employees. Young Employee 49% (age between 21 -40) are more engaged as compared to older employees (age 41 & above).

Pearson Chi-Square value 8.72. - Significant at 5%

Table 6 shows the engagement level of employees on the basis of experience, employees who have experience less than 10 years are more engaged in their organisations as compared to employees having experience more than 10 years.

A perusal of Tables 3-6 shows that while to there was a significant variation (at 5%) to the extent of engagement on

Employees’ Perceptions on Empowerment and Engagement

Table 3: Variation in Employee Engagement by Sex of the Respondents

Sex:Male/Female

Total Engagement Total

LowEngagement

<= 20.00

High Engagement

20.01+

Male 26 (49%) 27 (51%) 53

Female 14 (78%) 4 (22%) 18

Total 40 31 71

Table 4: Variation in Employee Engagement by ownership of organisation (Government/Private)

of the Respondents

Organisation Government /

Private

Total Engagement Total

Government 43

Private 28

Total 71

Low Engagement

<= 20.00

High Engagement

20.01+

30 (70%) 13 (30%)

10 (36%) 18 (64%)

40 31

Table 5: Variation in Employee Engagement by Age of the Respondents

Age (in years) Total Engagement Total

Between21– 40 years

43

41years & above

28

Total 71

Low Engagement

<= 20.00

High Engagement

20.01+

22 (51%) 21(49%)

18 (64%) 10 (36%)

40 31

the basis of sex and age. However, as regards organisationally determined antecedents, on both the counts that is, experience in the organisation as well as its ownership structure the variation was observed to be significant. In general, out of the total number of respondents indicating higher engagement levels, males appear to be better represented in among the highly engaged respondents. Males and females differed significantly as regards their respective levels of engagement and so did the younger and older employees. Sex, ownership (Government/Private) were observed to be significant at 5%.

Table 7 shows that employees covered in the study have opportunities for training, development and growth; they participate in organisational decision making process and also have free and frank communication at different levels. This types of situation suits well for Indian organisations to empower their employees who are regarded as critical for organisational effectiveness.

Extent of Employee Empowerment

Notes: * Figures have been rounded-off# Based upon the score of above 20 out of a total 30## Based upon the score of below 20 out of a total 30

How does the extent of employee empowerment vary across the personal and organizational characteristics? For this, let us turn our attention to Tables 8 to 11.Pearson Chi-Square value 4.987. Significant at 5%.

A perusal of Table 8 shows that the variation in the extent of empowerment on the basis of Sex : Male/Female was observed to be significant at 5%.Male employees feel

more empowered whereas female employees feel low empowered.

Pearson Chi-Square value 6.543 - Significant at 5%.

A perusal of Table 9 show that the variation in the extent of empowermen t on the bas i s o f owne r sh ip Government/Private was observed to be significant at 5%. Employees in private sectors feel more empowered (50%) as compared to employees in government sector (21%).

Pearson Chi-Square value 4.461 - Significant at 5%.

A perusal of Table 10 show that the variation in the extent of empowerment on the basis of Age was observed to be significant at 5%. Young Employees having age in between

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 43

Employees’ Perceptions on Empowerment and Engagement

Table 6 Variation in Employee Engagement by Experience in present organisation of the

Respondents

Experience in present

organisation

Total Engagement Total

10- years or below

41

11- years & above

30

Total 71

Low<= 20.00

High20.01+

17(41%) 24(59%)

23(77%) 7(23%)

40 31

Table: 7 Extent of Empowerment

Extent of Empowerment(Opportunity for training development and growth, Employees participation in decision making, Free and frank communication among different levels)

Number of Respondents

Percentage*

High Empowerment # 23 32

Low Empowerment## 48 68

Total 71 100

Table 8: Variation in Employee Empowerment by Sex of the Respondents

Sex: Male/Female

Total Empowerment Total

Male 53

Female 18

Total 71

Low Empowerment

<= 20.00

High Empowerment

20.01+

32(60%) 21(40%)

16(89%) 2(11%)

48 23

Table 9 Variation in Employee Empowerment by ownership on organisation (Government/Private)

of the Respondents

Organisation Government

/Private

Total Empowerment Total

Government 43

Private 28

Total 71

Low Empowerment

<= 20.00

High Empowerment

20.01+

34(79%) 9(21%)

14(50%) 14(50%)

48 23

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 201244

Employees’ Perceptions on Empowerment and Engagement

21-40 years feel more empowered as compared to older employees having age above 40 years

Pearson Chi-Square value 9.011 - Significant at 5%

A perusal of Table: 11show that the variation in the extent of empowerment on the basis of experience was observed to be significant at 5%. Employees having experience less than 15 years feel more empowered than the employees who have experience more than 15 years.

A perusal of Tables 3-11 shows that perception of employee-empowerment significantly dependent on all the independent variables, viz., age, sex, experience and nature of organisation.

Comparative observations on of Employee Engagement and Employee Empowerment

Having examined the extent of employee engagement and employee empowerment and the determinants thereof separately, let us turn our attention to a comparative study of the respondents’ perceptions relating to these two

aspects of human resource management. To begin with lets us reexamine the results obtained in Tables 2 and 7. It is evident that on a comparative basis, greater proportion of the respondents felt highly empowered (32%) than those feeling highly engaged (23%). To the extent we may rely on the proposition that empowerment is more an organizationally determined outcome than engagement, it would seem that Indian organisations are doing fairly well as regards employee empowerment and that people are yet to discover the convergence of body, mind, heart and soul at the workplace. However, we shall desist from making any conclusive observation at the moment and in this paper.

Is there any correlation between employee empowerment and employee engagement? Table 12 provides some useful insights. Pearson Chi-Square value 43.898 - Significant at 5%

A perusal of Table12 show that the variation in the extent of total empowerment on the basis of total engagement was observed to be significant at 5%. Table indicates that employee empowerment and employee engagement has posit ive relat ionship, employees having low empowerment are low engaged in their jobs. On the other hand employees having high empowerment are highly engaged in their jobs.

11. Concluding Observations

The survey of the employees’ perceptions about the extent of engagement and empowerment shows higher level of engagement as well as empowerment for employees who are young, male and were working for private sector organisations. Thus, the personal as well as organizational backgrounds seem to affect the employee perceptions about engagement and empowerment similarly.

Table 10: Variation in Employee Empowerment by Age of the Respondents

Age Total Empowerment Total

21 – 40years 43

41yrs and above

28

Total 71

Low Empowerment

<= 20.00

High Empowerment

20.01+

25(58%) 18(42%)

23(82%) 5(18%)

48 23

Table 11 Variation in Employee Empowerment by Experience in Present Organisation of the

Respondent

Experience in present

organisation

Total Empowerment Total

15years or below

44

16years or above

27

Total 71

Low Empowerment

<= 20.00

High Empowerment

20.01+

24(55%) 20(45%)

24(89%) 3(11%)

48 23

Table 12 Variation in Total Employee Engagement by Total Employee Empowerment

of the Respondents

Total Engagement

Score

Total Empowerment Total

Low engagement <= 20.00

40

High Engagement

20.01+31

Total 71

Low Empowerment

<= 20.00

High Empowerment

20.01+

40 (100%) 0(0%)

8 (26%) 23 (74%)

48 23

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 45

Employees’ Perceptions on Empowerment and Engagement

Independent of the personal and organisational backgrounds, employee empowerment and employee engagement show positive relationship, that is, employees who reported low-level of empowerment also reported low level of engagement as well. Likewise, employees experiencing higher empowerment also reported high-level of engagement. However, a greater proportion of employees surveyed felt highly empowered than those who felt highly engaged.

What implications do these findings carry for the development of conceptual, theoretical and empirical frameworks for studying employee-empowerment and employee-engagement? What practical implications do these findings have for the managers and organisational leaders? The model of the study provides some cues albeit the scope of the present paper was limited to a discussion of employee perceptions only. We leave these questions for further research.

References

Ashforth, B. E.,and Mael, F. (1989). Social identity theory and the organization. Academy of Management Review, 14: 20-39.

Magid Igbaria, Saroj Parasuraman, Michael K. Badawy (1994) Work Experiences, Job Involvement, and Quality of Work Life among Information Systems Personnel. MIS Quarterly, Vol. 18, No. 2 pp. 175-201

Baumruk, R. (2004) ‘The missing link: the role of employee engagement in business success’,Workspan, Vol 47, pp48-52.

Blanchard, K., Carlos, J.P. & Randolph, A. (1996). Empowerment Takes More Than a Minute. San Francisco, Berrett Koehler.

Becker, T. E. (1992). Foci and bases of commitment: Are they distinctions worth making? Academy of Management Journal, 35: 232-244.

Cohen, A. (1993). Work commitment in relation to withdrawal intentions and union effectiveness. Journal of Business Research, 26: 75-90.

Conger, J.A. & Kanungo, R.N. (1988). The empowerment process: Integrating theory and practice. Academy of Management Review, 13-3, p. 471.

Frank, F.D., Finnegan, R.P. and Taylor, C.R. (2004) ‘The race for talent: retaining and engaging workers in the 21st century’, Human Resource Planning, Vol. 27, No 3, pp12-25.

Freud, S. (1922) in Ferguson, A. (2007) ‘Employee engagement: Does it exist, and if so, how does it relate to

performance, other constructs and individual differences?’ [online] Available at: http://www.lifethatworks.com/ Employee-Engagement.prn.pdf

Gandz, J. (1990). The Employee Empowerment era. Business Quarterly, 55-2, p. 74.

Grove, P.B. (ed.), (1971). Webster's Third New International Dictionary of the English Language Unabridged.

Gupta K.S. (1999) Empowerment: a Conceptual and Exploratory Study. Unpublished Ph.D. Dissertation submitted to IIT, Bombay.

Kanter, R.M. (1979). Power failure in management circuits. Harvard Business Review, 57-4, p. 65.

Hunt and Robert M. Morgan (1994) Organizational Commitment One of Many Commitments or Key Mediating Construct? The Academy of Management Journal, Vol. 37, No. 6 (Dec., 1994), pp. 1568-1587.

Kahn, W.A. (1990) ‘Psychological conditions of personal engagement and disengagement at work’, Academy of Management Journal, Vol.33, pp 692-724.

Lee, Seok-Hwan, and Dorothy Olshfski. (2001). An Examination of Variations in the Nature of Employee Commitment between Paid Employees and Volunteers: Understanding Different Motivational Bases in the Public Sector. Paper presented at the 62nd ASPA National Conference, March 10-13, Newark, New Jersey.

Lee and Dorothy Olshfski (2002). Employee Commitment and Firefighters: It's My Job. Public Administration Review, Vol. 62, pp. 108-114.

Mowday, Richard T., Richard M. Steers, and Lyman W. Porter.( 1979). The Measurement of Organizational Commitment. Journal of Vocational Behavior 14(2): 43-77.

Menon,S(2001). Employee Empowerment: An Integrative Psychological Approach. Applied Psychology, January 2001 p153-180.

Mayer and F. David Schoorman (1998). Differentiating Antecedents of Organizational Commitment: A Test of March and Simon's Model, Journal of Organizational Behavior, Vol. 19, No. 1 (Jan., 1998), pp. 15-28.

O'Reilly, C. A., III, and Chatman, J. (1986). Organizational commitment and psychological attachment: The effects of compliance, identification, and internalization.

Perryman S, Hayday S,(2004). The Drivers of employee engagement,

Report 408, Institute for Employment Studies, April 2004

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 201244

Employees’ Perceptions on Empowerment and Engagement

21-40 years feel more empowered as compared to older employees having age above 40 years

Pearson Chi-Square value 9.011 - Significant at 5%

A perusal of Table: 11show that the variation in the extent of empowerment on the basis of experience was observed to be significant at 5%. Employees having experience less than 15 years feel more empowered than the employees who have experience more than 15 years.

A perusal of Tables 3-11 shows that perception of employee-empowerment significantly dependent on all the independent variables, viz., age, sex, experience and nature of organisation.

Comparative observations on of Employee Engagement and Employee Empowerment

Having examined the extent of employee engagement and employee empowerment and the determinants thereof separately, let us turn our attention to a comparative study of the respondents’ perceptions relating to these two

aspects of human resource management. To begin with lets us reexamine the results obtained in Tables 2 and 7. It is evident that on a comparative basis, greater proportion of the respondents felt highly empowered (32%) than those feeling highly engaged (23%). To the extent we may rely on the proposition that empowerment is more an organizationally determined outcome than engagement, it would seem that Indian organisations are doing fairly well as regards employee empowerment and that people are yet to discover the convergence of body, mind, heart and soul at the workplace. However, we shall desist from making any conclusive observation at the moment and in this paper.

Is there any correlation between employee empowerment and employee engagement? Table 12 provides some useful insights. Pearson Chi-Square value 43.898 - Significant at 5%

A perusal of Table12 show that the variation in the extent of total empowerment on the basis of total engagement was observed to be significant at 5%. Table indicates that employee empowerment and employee engagement has posit ive relat ionship, employees having low empowerment are low engaged in their jobs. On the other hand employees having high empowerment are highly engaged in their jobs.

11. Concluding Observations

The survey of the employees’ perceptions about the extent of engagement and empowerment shows higher level of engagement as well as empowerment for employees who are young, male and were working for private sector organisations. Thus, the personal as well as organizational backgrounds seem to affect the employee perceptions about engagement and empowerment similarly.

Table 10: Variation in Employee Empowerment by Age of the Respondents

Age Total Empowerment Total

21 – 40years 43

41yrs and above

28

Total 71

Low Empowerment

<= 20.00

High Empowerment

20.01+

25(58%) 18(42%)

23(82%) 5(18%)

48 23

Table 11 Variation in Employee Empowerment by Experience in Present Organisation of the

Respondent

Experience in present

organisation

Total Empowerment Total

15years or below

44

16years or above

27

Total 71

Low Empowerment

<= 20.00

High Empowerment

20.01+

24(55%) 20(45%)

24(89%) 3(11%)

48 23

Table 12 Variation in Total Employee Engagement by Total Employee Empowerment

of the Respondents

Total Engagement

Score

Total Empowerment Total

Low engagement <= 20.00

40

High Engagement

20.01+31

Total 71

Low Empowerment

<= 20.00

High Empowerment

20.01+

40 (100%) 0(0%)

8 (26%) 23 (74%)

48 23

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 45

Employees’ Perceptions on Empowerment and Engagement

Independent of the personal and organisational backgrounds, employee empowerment and employee engagement show positive relationship, that is, employees who reported low-level of empowerment also reported low level of engagement as well. Likewise, employees experiencing higher empowerment also reported high-level of engagement. However, a greater proportion of employees surveyed felt highly empowered than those who felt highly engaged.

What implications do these findings carry for the development of conceptual, theoretical and empirical frameworks for studying employee-empowerment and employee-engagement? What practical implications do these findings have for the managers and organisational leaders? The model of the study provides some cues albeit the scope of the present paper was limited to a discussion of employee perceptions only. We leave these questions for further research.

References

Ashforth, B. E.,and Mael, F. (1989). Social identity theory and the organization. Academy of Management Review, 14: 20-39.

Magid Igbaria, Saroj Parasuraman, Michael K. Badawy (1994) Work Experiences, Job Involvement, and Quality of Work Life among Information Systems Personnel. MIS Quarterly, Vol. 18, No. 2 pp. 175-201

Baumruk, R. (2004) ‘The missing link: the role of employee engagement in business success’,Workspan, Vol 47, pp48-52.

Blanchard, K., Carlos, J.P. & Randolph, A. (1996). Empowerment Takes More Than a Minute. San Francisco, Berrett Koehler.

Becker, T. E. (1992). Foci and bases of commitment: Are they distinctions worth making? Academy of Management Journal, 35: 232-244.

Cohen, A. (1993). Work commitment in relation to withdrawal intentions and union effectiveness. Journal of Business Research, 26: 75-90.

Conger, J.A. & Kanungo, R.N. (1988). The empowerment process: Integrating theory and practice. Academy of Management Review, 13-3, p. 471.

Frank, F.D., Finnegan, R.P. and Taylor, C.R. (2004) ‘The race for talent: retaining and engaging workers in the 21st century’, Human Resource Planning, Vol. 27, No 3, pp12-25.

Freud, S. (1922) in Ferguson, A. (2007) ‘Employee engagement: Does it exist, and if so, how does it relate to

performance, other constructs and individual differences?’ [online] Available at: http://www.lifethatworks.com/ Employee-Engagement.prn.pdf

Gandz, J. (1990). The Employee Empowerment era. Business Quarterly, 55-2, p. 74.

Grove, P.B. (ed.), (1971). Webster's Third New International Dictionary of the English Language Unabridged.

Gupta K.S. (1999) Empowerment: a Conceptual and Exploratory Study. Unpublished Ph.D. Dissertation submitted to IIT, Bombay.

Kanter, R.M. (1979). Power failure in management circuits. Harvard Business Review, 57-4, p. 65.

Hunt and Robert M. Morgan (1994) Organizational Commitment One of Many Commitments or Key Mediating Construct? The Academy of Management Journal, Vol. 37, No. 6 (Dec., 1994), pp. 1568-1587.

Kahn, W.A. (1990) ‘Psychological conditions of personal engagement and disengagement at work’, Academy of Management Journal, Vol.33, pp 692-724.

Lee, Seok-Hwan, and Dorothy Olshfski. (2001). An Examination of Variations in the Nature of Employee Commitment between Paid Employees and Volunteers: Understanding Different Motivational Bases in the Public Sector. Paper presented at the 62nd ASPA National Conference, March 10-13, Newark, New Jersey.

Lee and Dorothy Olshfski (2002). Employee Commitment and Firefighters: It's My Job. Public Administration Review, Vol. 62, pp. 108-114.

Mowday, Richard T., Richard M. Steers, and Lyman W. Porter.( 1979). The Measurement of Organizational Commitment. Journal of Vocational Behavior 14(2): 43-77.

Menon,S(2001). Employee Empowerment: An Integrative Psychological Approach. Applied Psychology, January 2001 p153-180.

Mayer and F. David Schoorman (1998). Differentiating Antecedents of Organizational Commitment: A Test of March and Simon's Model, Journal of Organizational Behavior, Vol. 19, No. 1 (Jan., 1998), pp. 15-28.

O'Reilly, C. A., III, and Chatman, J. (1986). Organizational commitment and psychological attachment: The effects of compliance, identification, and internalization.

Perryman S, Hayday S,(2004). The Drivers of employee engagement,

Report 408, Institute for Employment Studies, April 2004

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 201246

Employees’ Perceptions on Empowerment and Engagement

Randall, D. (1990). The consequences of organizational commitment: methodological investigation. Journal of Organizational Behavior, 11, 361–378.

Reichers, A. E. (1985). A review and reconceptualization of organizational commitment. Academy of Management Review, 10: 465-476.

Reichers, A. E. (1986). Conflict and organizational commitments. Journal of Applied Psychology.

Robinson D Richman, A. (2006). ‘Everyone wants an engaged workforce how

can you create it?’ Workspan, Vol 49, pp36-39.

Randolph, W.A. (1995). Navigating the journey to empowerment. Organizational Dynamics, 23-4, p.19.

Shaw, K. (2005). ‘An engagement strategy process for communicators’, Strategic Communication Management,

Vol 9, No 3, pp26-29.

Thomas, K.W. & Velthouse, B.A. (1990). Cognitive elements of empowerment: An "interpretive" model of intrinsic task motivation. Academy of Management Review, 15-4, p. 666.

Truss, C., Soane, E., Edwards, C., Wisdom, K., Croll, A. and Burnett, J. (2006) Working Life ,Employee Attitudes and Engagement 2006.

Vazirani (2007). Employee Engagement Working Paper 05/07. SIES College of Management Studies Nerul.

Zimmerman, M.A. (1990). Taking aim on empowerment research: On the distinction between individual and psychological conceptions. American Journal of Community Psychology, 18-1, p.169.

ABSTRACT

Life insurance and retirement planning which have quite a lot to do with insurance industry are questions

of interest. The insurance industry focuses on close contact among clients, sales people and managers.

That is a human-oriented industry, for which the experienced leaders inspire the sales people through

continuous training and encouragement and lead them by vision. Therefore, leader’s leadership type is

the critical factor for the success of the organization. This research explores the relationships among

leader’s leadership style, subordinate’s personality characteristic, and job stress and turnover intention.

We also identified the role of personality characteristic and job stress respectively. We used convenient

sampling method to collect data. We adopt SPSS to do data analysis and draw conclusions.

Key words: Leadership Style, Job Stress, Personality Characteristic, Turnover Intention.

1. Introduction

Life insurance and retirement planning that have quite a lot to do with insurance are questions of interest. The insurance industry focuses on close contact and interaction among clients, sales people and managers. That is a human-oriented industry, for which the experienced leaders inspire the sales people through continuous training and encouragement and lead them to work hard to achieve goals by vision. The leader’s leadership type plays an important role in performance of the organization. The leader’s ability to adapt to internal and external environment changes and lead a group of cordial subordinates to work together is the key to success. Thus, this research explores the relationships among the leader’s leadership style and the subordinate’s personality characteristic, job stress and turnover intention. This research also studies the role of the variable of personality characteristic and job stress respectively and gives advice to managers to lower the turnover rate in the life insurance industry. The specific research objectives are listed as follows: (1) to explore the influence of leadership style on the subordinate’s job stress; (2) to explore the influence of job stress on turnover intention; (3) to explore the influence of different leadership style on the turnover intention; (4) to explore the moderating role of personality characteristic

on leadership style and job stress respectively; (5) to explore the mediating effect of personality characteristic and job stress respectively.

2. Literature Review

2.1 Leadership StyleThe practice and academic circles agree that leadership is really an important subject in the field of organizational behavior. Leadership is one with the most dynamic effects during individual and organizational interaction. In other words, whether a management is able to execute “collaborated effort” depends on leadership capability. The excellent leader not only inspires subordinate’s potential to enhance efficiency but also meets their requirements in the process of achieving organizational goals.

Stogdill (1957) defined leadership as the individual behavior to guide a group to achieve the common target. In latter days, Richards & Engle (1986) defined leadership as establishment of vision, value and creation of environment so that the objective can be accomplished. Definitions on leadership defined by selected authors are summarized in Table 1.

Effect of Leadership Styles on Job Stress and Turnover Intention of Indian Insurance Industry

Dr. Rajul Bhardwaj*

* Assistant Professor, Faculty of Management Studies, Gurukul Kangri University, Haridwar (U.K.)

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 47

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 201246

Employees’ Perceptions on Empowerment and Engagement

Randall, D. (1990). The consequences of organizational commitment: methodological investigation. Journal of Organizational Behavior, 11, 361–378.

Reichers, A. E. (1985). A review and reconceptualization of organizational commitment. Academy of Management Review, 10: 465-476.

Reichers, A. E. (1986). Conflict and organizational commitments. Journal of Applied Psychology.

Robinson D Richman, A. (2006). ‘Everyone wants an engaged workforce how

can you create it?’ Workspan, Vol 49, pp36-39.

Randolph, W.A. (1995). Navigating the journey to empowerment. Organizational Dynamics, 23-4, p.19.

Shaw, K. (2005). ‘An engagement strategy process for communicators’, Strategic Communication Management,

Vol 9, No 3, pp26-29.

Thomas, K.W. & Velthouse, B.A. (1990). Cognitive elements of empowerment: An "interpretive" model of intrinsic task motivation. Academy of Management Review, 15-4, p. 666.

Truss, C., Soane, E., Edwards, C., Wisdom, K., Croll, A. and Burnett, J. (2006) Working Life ,Employee Attitudes and Engagement 2006.

Vazirani (2007). Employee Engagement Working Paper 05/07. SIES College of Management Studies Nerul.

Zimmerman, M.A. (1990). Taking aim on empowerment research: On the distinction between individual and psychological conceptions. American Journal of Community Psychology, 18-1, p.169.

ABSTRACT

Life insurance and retirement planning which have quite a lot to do with insurance industry are questions

of interest. The insurance industry focuses on close contact among clients, sales people and managers.

That is a human-oriented industry, for which the experienced leaders inspire the sales people through

continuous training and encouragement and lead them by vision. Therefore, leader’s leadership type is

the critical factor for the success of the organization. This research explores the relationships among

leader’s leadership style, subordinate’s personality characteristic, and job stress and turnover intention.

We also identified the role of personality characteristic and job stress respectively. We used convenient

sampling method to collect data. We adopt SPSS to do data analysis and draw conclusions.

Key words: Leadership Style, Job Stress, Personality Characteristic, Turnover Intention.

1. Introduction

Life insurance and retirement planning that have quite a lot to do with insurance are questions of interest. The insurance industry focuses on close contact and interaction among clients, sales people and managers. That is a human-oriented industry, for which the experienced leaders inspire the sales people through continuous training and encouragement and lead them to work hard to achieve goals by vision. The leader’s leadership type plays an important role in performance of the organization. The leader’s ability to adapt to internal and external environment changes and lead a group of cordial subordinates to work together is the key to success. Thus, this research explores the relationships among the leader’s leadership style and the subordinate’s personality characteristic, job stress and turnover intention. This research also studies the role of the variable of personality characteristic and job stress respectively and gives advice to managers to lower the turnover rate in the life insurance industry. The specific research objectives are listed as follows: (1) to explore the influence of leadership style on the subordinate’s job stress; (2) to explore the influence of job stress on turnover intention; (3) to explore the influence of different leadership style on the turnover intention; (4) to explore the moderating role of personality characteristic

on leadership style and job stress respectively; (5) to explore the mediating effect of personality characteristic and job stress respectively.

2. Literature Review

2.1 Leadership StyleThe practice and academic circles agree that leadership is really an important subject in the field of organizational behavior. Leadership is one with the most dynamic effects during individual and organizational interaction. In other words, whether a management is able to execute “collaborated effort” depends on leadership capability. The excellent leader not only inspires subordinate’s potential to enhance efficiency but also meets their requirements in the process of achieving organizational goals.

Stogdill (1957) defined leadership as the individual behavior to guide a group to achieve the common target. In latter days, Richards & Engle (1986) defined leadership as establishment of vision, value and creation of environment so that the objective can be accomplished. Definitions on leadership defined by selected authors are summarized in Table 1.

Effect of Leadership Styles on Job Stress and Turnover Intention of Indian Insurance Industry

Dr. Rajul Bhardwaj*

* Assistant Professor, Faculty of Management Studies, Gurukul Kangri University, Haridwar (U.K.)

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 47

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Effect of Leadership Styles on Job Stress and Turnover Intention of Indian Insurance Industry

Table 1 : Definitions of Leadership

Year Author Definition of Leadership

1957 Hemphill & Coons Leadership is the individual behavior to guide a group to achieve the common target.

1957 Stogdill Leadership is an activity to influence others or organization to achieve the target set by the leader.

1969 Bowers Leadership is a process to influence interpersonal relationships; other’s behavior is influenced through this process to achieve the set target.

1977 Davis Leadership means persuasion of others to enthusiastically chase certain target.

1982 Morphet, Johns Leadership means, in the& Reller social system, influencing

the individual action, behavior, faith and target of others through voluntee cooperation.

1986 Richards & Engle Leadership is about establishment of vision, value and creation of environment so that the objective can be accomplished.

1990 Sergiovanni Leadership means satisfying staff’s demand through consultation, negotiation and compromise.

1990 Jacobs & Jaques Leadership helps others to strive and to enhance aspiration to achieve the target.

1993 Robbins Leadership is the ability to influence the group to achieve the target.

1994 Yukl Leadership is the process of influencing subordinate, in which the subordinates are inspired to achieve the target.

2001 Northouse Leadership is exchanged relationship between the leader and subordinates.

2003 Fry Leadership means use of leading strategy to offer inspiring motive and to enhance the staff’s potential for growth and development.

The studies on leadership theory could be divided into four periods:

(1). Traits Theory (1930s): It focuses on the innate leadership qualities and competence. These innate qualities are not found in others. The so-called quality can be divided into physiological and mental aspects. The physiological aspect includes: height, weight, looks, and vigor while the mental aspect inc ludes in te l l igence, conf idence, and aggressiveness etc. Stogdill (1948) proposed twelve leadership related studies and was considered as representative of this period.

(2). Behavioral Theory (from late 1940s to late 1960s): It believes that a leader will be able to achieve ideal organizational efficiency if he demonstrates effective leadership behaviors. These leadership behaviors may be trained or learned through experience. Actual behavior or leadership styles are emphasized. Representative research is conducted in Ohio State University. Ohio State University proposed “consideration“ and “initiating structure” of leadership behaviors. Consideration is a behavior that focuses on strengthening relationship with subordinates based on their needs and perceptions, while “initiating structure” is a behavior that focuses on subordinate performance in goal accomplishment.

(3). Contingency Theory (late 1960s): This theory states that there is no set of optimum leadership model in this world and that it depends on the situation encountered. Situational leadership theory began its development subsequently. It states that leaders need to adopt the most optimum leadership style based on different organizational situations. Among which, Fiedler’s contingency theory (1967) is most well-known.

(4). Contemporary Leadership Theory (since 1970s): The viewpoint of contemporary leadership theory states that leadership is a type of interactive process with the environment. Bass & Avolio (1990) proposed transactional leadership and transformation leadership:( i ) transactional leadership---

occupational pressure or burden which badly affects the psychological and physical condition of the worker himself.

1978 Beehr & Newman Stress is the change that drives the worker from normal psychological and physical condition.

1980 Ivancevich & Stress is some adaptiveMatteson reaction, a consequence of

special psychological or physical demand from the event, and such reaction takes personal character as intermediary.

1984 Fleming et al. Stress is a conceptualized process and contains one’s recognition and reaction to danger or threat.

1985 Jamal Stress is one’s reaction against threat in the working environment.

1998 Peng The psychology claims that job stress is neither stimulus nor reaction but some handling method or relationship.

3. Personality Charateristics

Personality characteristic means one’s psychological and physical phenomenon. At different time and condition, it adapts to different environment by unique behavioral mode and thinking method. Friedman & Rosenman (1959) categorize personality characteristics into type A and B. Type A shows exuberant ambition and aggression. Type B has more patience and pays less attention to competition and sense of achievement.

Definitions of personality characteristic are summarized in Table 3. Table 3: Definitions of Personality Characteristic

Year Author Definition of Personality Characteristic

1959 Guilford Personality characteristic is a combination of individual trait and property, which generates a lasting and special characteristic different from the others.

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Effect of Leadership Styles on Job Stress and Turnover Intention of Indian Insurance Industry

encouraging subordinates through incentive establishment. In other words, incentive elicits work performance. Transactional leadership is the basis for most leadership theories. It focuses on the exchange relationship between the leader and the subordinate (Fry, 2003; Northouse, 2001); (ii) transformation leadership – to enhance staff’s trust and respect for the leader by altering intrinsic work value and faith of staff at the same time in order to elicit work capabilities. Because “charisma” is viewed as an essential element, transformation leader provides incentives for subordinates, enhance subordinate potential and development. (Fry, 2003); and (3) Charismatic leadership theory refers to the follower’s perception toward certain behaviors of the leader as being heroic or extraordinary.

2.2 Job Stress

Job stress means improper occupational stress or burden that badly affects the psychological and physical condition of the worker himself (Kroes, 1974). Peng (1998) states that psychological stress is neither stimulus nor reaction but a handling method or relationship; it is the interaction between the individual and the environment, which gains or consumes resources of human behavior and endangers the individual health. When the individual feels job stress, it usually comes along with following symptoms: (i) psychological aspect – passive, disconsolate, anxious and anger; (ii) physical aspect – imbalance incretion, headache, sleepless and disturbed; (iii) behavioral aspect– change of living behavior, decrease of job involvement, absence from work, and turnover. The definitions of Job stress given by various authors are summarized in Table 2.

Table 2 Definitions of Job Stress

Year Author Definition of Job Stress

1956 Seley Stress means uncertain reaction of the body to demand from internal or external environment, or reaction result against threat of balance condition.

1971 French Stress is the consequence that an individual’s ability or skills fail to coordinate with the job or the job environment cannot satisfy the individual demand.

1974 Kroes Stress is improper

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 201248

Effect of Leadership Styles on Job Stress and Turnover Intention of Indian Insurance Industry

Table 1 : Definitions of Leadership

Year Author Definition of Leadership

1957 Hemphill & Coons Leadership is the individual behavior to guide a group to achieve the common target.

1957 Stogdill Leadership is an activity to influence others or organization to achieve the target set by the leader.

1969 Bowers Leadership is a process to influence interpersonal relationships; other’s behavior is influenced through this process to achieve the set target.

1977 Davis Leadership means persuasion of others to enthusiastically chase certain target.

1982 Morphet, Johns Leadership means, in the& Reller social system, influencing

the individual action, behavior, faith and target of others through voluntee cooperation.

1986 Richards & Engle Leadership is about establishment of vision, value and creation of environment so that the objective can be accomplished.

1990 Sergiovanni Leadership means satisfying staff’s demand through consultation, negotiation and compromise.

1990 Jacobs & Jaques Leadership helps others to strive and to enhance aspiration to achieve the target.

1993 Robbins Leadership is the ability to influence the group to achieve the target.

1994 Yukl Leadership is the process of influencing subordinate, in which the subordinates are inspired to achieve the target.

2001 Northouse Leadership is exchanged relationship between the leader and subordinates.

2003 Fry Leadership means use of leading strategy to offer inspiring motive and to enhance the staff’s potential for growth and development.

The studies on leadership theory could be divided into four periods:

(1). Traits Theory (1930s): It focuses on the innate leadership qualities and competence. These innate qualities are not found in others. The so-called quality can be divided into physiological and mental aspects. The physiological aspect includes: height, weight, looks, and vigor while the mental aspect inc ludes in te l l igence, conf idence, and aggressiveness etc. Stogdill (1948) proposed twelve leadership related studies and was considered as representative of this period.

(2). Behavioral Theory (from late 1940s to late 1960s): It believes that a leader will be able to achieve ideal organizational efficiency if he demonstrates effective leadership behaviors. These leadership behaviors may be trained or learned through experience. Actual behavior or leadership styles are emphasized. Representative research is conducted in Ohio State University. Ohio State University proposed “consideration“ and “initiating structure” of leadership behaviors. Consideration is a behavior that focuses on strengthening relationship with subordinates based on their needs and perceptions, while “initiating structure” is a behavior that focuses on subordinate performance in goal accomplishment.

(3). Contingency Theory (late 1960s): This theory states that there is no set of optimum leadership model in this world and that it depends on the situation encountered. Situational leadership theory began its development subsequently. It states that leaders need to adopt the most optimum leadership style based on different organizational situations. Among which, Fiedler’s contingency theory (1967) is most well-known.

(4). Contemporary Leadership Theory (since 1970s): The viewpoint of contemporary leadership theory states that leadership is a type of interactive process with the environment. Bass & Avolio (1990) proposed transactional leadership and transformation leadership:( i ) transactional leadership---

occupational pressure or burden which badly affects the psychological and physical condition of the worker himself.

1978 Beehr & Newman Stress is the change that drives the worker from normal psychological and physical condition.

1980 Ivancevich & Stress is some adaptiveMatteson reaction, a consequence of

special psychological or physical demand from the event, and such reaction takes personal character as intermediary.

1984 Fleming et al. Stress is a conceptualized process and contains one’s recognition and reaction to danger or threat.

1985 Jamal Stress is one’s reaction against threat in the working environment.

1998 Peng The psychology claims that job stress is neither stimulus nor reaction but some handling method or relationship.

3. Personality Charateristics

Personality characteristic means one’s psychological and physical phenomenon. At different time and condition, it adapts to different environment by unique behavioral mode and thinking method. Friedman & Rosenman (1959) categorize personality characteristics into type A and B. Type A shows exuberant ambition and aggression. Type B has more patience and pays less attention to competition and sense of achievement.

Definitions of personality characteristic are summarized in Table 3. Table 3: Definitions of Personality Characteristic

Year Author Definition of Personality Characteristic

1959 Guilford Personality characteristic is a combination of individual trait and property, which generates a lasting and special characteristic different from the others.

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 49

Effect of Leadership Styles on Job Stress and Turnover Intention of Indian Insurance Industry

encouraging subordinates through incentive establishment. In other words, incentive elicits work performance. Transactional leadership is the basis for most leadership theories. It focuses on the exchange relationship between the leader and the subordinate (Fry, 2003; Northouse, 2001); (ii) transformation leadership – to enhance staff’s trust and respect for the leader by altering intrinsic work value and faith of staff at the same time in order to elicit work capabilities. Because “charisma” is viewed as an essential element, transformation leader provides incentives for subordinates, enhance subordinate potential and development. (Fry, 2003); and (3) Charismatic leadership theory refers to the follower’s perception toward certain behaviors of the leader as being heroic or extraordinary.

2.2 Job Stress

Job stress means improper occupational stress or burden that badly affects the psychological and physical condition of the worker himself (Kroes, 1974). Peng (1998) states that psychological stress is neither stimulus nor reaction but a handling method or relationship; it is the interaction between the individual and the environment, which gains or consumes resources of human behavior and endangers the individual health. When the individual feels job stress, it usually comes along with following symptoms: (i) psychological aspect – passive, disconsolate, anxious and anger; (ii) physical aspect – imbalance incretion, headache, sleepless and disturbed; (iii) behavioral aspect– change of living behavior, decrease of job involvement, absence from work, and turnover. The definitions of Job stress given by various authors are summarized in Table 2.

Table 2 Definitions of Job Stress

Year Author Definition of Job Stress

1956 Seley Stress means uncertain reaction of the body to demand from internal or external environment, or reaction result against threat of balance condition.

1971 French Stress is the consequence that an individual’s ability or skills fail to coordinate with the job or the job environment cannot satisfy the individual demand.

1974 Kroes Stress is improper

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Effect of Leadership Styles on Job Stress and Turnover Intention of Indian Insurance Industry

1961 Allport Personality means dynamic behavior from psychological and physical aspect to adapt to the environment.

1970 Pervin Personality represents structure and dynamics in reaction to the environment.

1972 Scott & Mitchell Personality is formed from accumulation of psychological growth and development.

1998 Robbins Personality is one’s reaction to the others and consequence of interaction with others.

1985 Lee Personality characteristic means psychological attributes of affection and thought among people; it’s also a specific and lasting behavioral pattern.

1997 Lu The formation of personality is affected by gene, culture, environment, and social factor.

4. Turnover Intention

Turnover intention means the subjective perception of the organizational member to quit the current job for other opportunity (Fan, 1978). Table 4 showed definitions of turnover intention defined by various authors. Table 4: Definitions of Turnover Intention

Year Author Definition of Turnover Intention

1973 Porter & Steers Retreating behavior from job dissatisfaction.

1975 Kraut The best anticipation for turnover

1975 Fishbein & Ajzen The best measurement to presume the worker’s turnover behavior

1978 Mobely Idea of leaving the current organization or post

1982 Bluedorn It is differ from actual turnover behavior which is influenced by more external element .

1993 Tett & Meyer Perception of a series of retreating cognitions.

5. Research Methodology

Research Framework Insurance is human-oriented business. The service it offers is intangible and the services of competitors are highly similar, for which the salespeople must face keen competition and challenge from competitors. The salesmen keep the turnover rate of life insurance high because of such job compensation without base pay and suffering from heavy stress that is hard to be accepted by the people.

The experienced leader is well aware of this fact and keeps training, assisting and inspiring the sales personnel. Therefore, the leader’s leadership style is very important for the performance achievement of organization. Therefore, we have a great interest in exploring the relationships among leadership style, personality characteristic, job stress and turnover intention. This research also tries to identify the role of variable for personality characteristic and job stress respectively. Framework of this research is shown as Figure1.

Fig 1 Research framework

6. Research Hypotheses

If the organization intends to keep outperforming in the violently competitive environment, leadership is the most influential factor. The objective of this research is to explore the relationships among leadership style and sales people job stress and turnover intention and the role of personality characteristic and job stress respectively. We learn from the above literature review that the leader’s leadership style has significant influence on the staff’s job stress and turnover intention. Thus, this research develops following hypothesis based on the research framework:

Different leadership style has different impact on the subordinate’s work willingness. The leader’s ability to adapt to internal and external environmental change and lead a group of cordial subordinates fighting together is one of the keys to success. Hsu (1986) conducts research on 222 operators of China Steel Company in Kaohsiung

Job StressLeadership styleTransformation

Transaction

Personality CharacteristicA typeB type

Turnover Intention

H4 H5

H2H6

H1

H3

H4 Personality characteristic has moderate effect on the relationship between leadership style and job stress.

H5 Personality characteristic has moderate effect on the relationship between job stress and turnover intention.

H6 Job stress has mediation effect on the relationship between leadership style and turnover intention.

7. Research Design

According to the purpose of the paper, we develop structural questionnaire. A 5-likert scale is used. The measurement of constructs is shown in Table 5.

Table 5: Measurement of Constructs

This research chooses sales personnel of local insurance companies as the subject and collects data by convenient sampling method. The survey instrument was initially pre-tested by 50 employees of M insurance company for content, readability, and ambiguity. Based on results of the pretest, minor changes were made to select questionnaire items, and the instrument were sent to 220 employees of insurance companies, for which 176 returned mailings were valid, with effective response rate at 80%.

After collecting the valid questionnaires, SPSS is used to do data analysis.

8. Data Analysis

Sample ProfileAfter collecting the valid questionnaires, we provide demographic information first and then SPSS is used to do data analysis. Descriptive statistics analysis (frequency allocation and percentage analysis) is used to display the profile of samples. Basic statistics of samples are shown in Table 6.

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 51

Effect of Leadership Styles on Job Stress and Turnover Intention of Indian Insurance Industry

on the relationship among leader’s personality characteristic, the leader behavior, the staff’s job stress and job satisfaction. The research indicated that consideration leadership had significantly negative connection with job stress, but the initiating structure is positively connected with job stress, the leadership style and job stress are negatively connected. Hence, we develop hypothesis as below:

H1 Leadership style has significant influence on job stress

H1a Transformational leadership has negative influence on job stress

H1b Transactional leadership has positive influence on job stress

Job stress is usually generated along with change of productivity such as passive job involvement, indifference to colleagues, envy and suspicion, efficiency drop, job absence, turnover, etc. Parasuraman & Alutto (1984) studied 217 employees of a food manufacturing company and found that job stress had positive connection with turnover intention. Therefore, we propose the hypothesis as follows.

H2 Job stress has positive influence on turnover intention.

Fleishman & Harris (1962) conducted research on relationships among leadership style, turnover rate and complaint rate. The research result reveals that consideration leadership style (transformational) has apparently negative connection with turnover, while initiating structure (transactional) is positively connected with turnover. Therefore, we develop hypotheses as below:

H3 Leadership style has significant influence on turnover intention.

H3a Transformational leadership has negative influence on turnover intention.

H3b Transactional leadership has positive influence on turnover intention.

Wang (1990) made his research on the subject of connection among employee with A-type personality characteristic, leader’s leadership style, and employee’s job stress” and found that people with A-type personality characteristic perceive more job stress than those with B-type, while B-type feels more job stress at low self-respect than those with A-type. Thus, hypotheses are developed as follows.

Construct item

Leadership style 25

Transformation 20

Transaction 5

Job stress 8

Personality characteristics 14

Turnover intention 5

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 201250

Effect of Leadership Styles on Job Stress and Turnover Intention of Indian Insurance Industry

1961 Allport Personality means dynamic behavior from psychological and physical aspect to adapt to the environment.

1970 Pervin Personality represents structure and dynamics in reaction to the environment.

1972 Scott & Mitchell Personality is formed from accumulation of psychological growth and development.

1998 Robbins Personality is one’s reaction to the others and consequence of interaction with others.

1985 Lee Personality characteristic means psychological attributes of affection and thought among people; it’s also a specific and lasting behavioral pattern.

1997 Lu The formation of personality is affected by gene, culture, environment, and social factor.

4. Turnover Intention

Turnover intention means the subjective perception of the organizational member to quit the current job for other opportunity (Fan, 1978). Table 4 showed definitions of turnover intention defined by various authors. Table 4: Definitions of Turnover Intention

Year Author Definition of Turnover Intention

1973 Porter & Steers Retreating behavior from job dissatisfaction.

1975 Kraut The best anticipation for turnover

1975 Fishbein & Ajzen The best measurement to presume the worker’s turnover behavior

1978 Mobely Idea of leaving the current organization or post

1982 Bluedorn It is differ from actual turnover behavior which is influenced by more external element .

1993 Tett & Meyer Perception of a series of retreating cognitions.

5. Research Methodology

Research Framework Insurance is human-oriented business. The service it offers is intangible and the services of competitors are highly similar, for which the salespeople must face keen competition and challenge from competitors. The salesmen keep the turnover rate of life insurance high because of such job compensation without base pay and suffering from heavy stress that is hard to be accepted by the people.

The experienced leader is well aware of this fact and keeps training, assisting and inspiring the sales personnel. Therefore, the leader’s leadership style is very important for the performance achievement of organization. Therefore, we have a great interest in exploring the relationships among leadership style, personality characteristic, job stress and turnover intention. This research also tries to identify the role of variable for personality characteristic and job stress respectively. Framework of this research is shown as Figure1.

Fig 1 Research framework

6. Research Hypotheses

If the organization intends to keep outperforming in the violently competitive environment, leadership is the most influential factor. The objective of this research is to explore the relationships among leadership style and sales people job stress and turnover intention and the role of personality characteristic and job stress respectively. We learn from the above literature review that the leader’s leadership style has significant influence on the staff’s job stress and turnover intention. Thus, this research develops following hypothesis based on the research framework:

Different leadership style has different impact on the subordinate’s work willingness. The leader’s ability to adapt to internal and external environmental change and lead a group of cordial subordinates fighting together is one of the keys to success. Hsu (1986) conducts research on 222 operators of China Steel Company in Kaohsiung

Job StressLeadership styleTransformation

Transaction

Personality CharacteristicA typeB type

Turnover Intention

H4 H5

H2H6

H1

H3

H4 Personality characteristic has moderate effect on the relationship between leadership style and job stress.

H5 Personality characteristic has moderate effect on the relationship between job stress and turnover intention.

H6 Job stress has mediation effect on the relationship between leadership style and turnover intention.

7. Research Design

According to the purpose of the paper, we develop structural questionnaire. A 5-likert scale is used. The measurement of constructs is shown in Table 5.

Table 5: Measurement of Constructs

This research chooses sales personnel of local insurance companies as the subject and collects data by convenient sampling method. The survey instrument was initially pre-tested by 50 employees of M insurance company for content, readability, and ambiguity. Based on results of the pretest, minor changes were made to select questionnaire items, and the instrument were sent to 220 employees of insurance companies, for which 176 returned mailings were valid, with effective response rate at 80%.

After collecting the valid questionnaires, SPSS is used to do data analysis.

8. Data Analysis

Sample ProfileAfter collecting the valid questionnaires, we provide demographic information first and then SPSS is used to do data analysis. Descriptive statistics analysis (frequency allocation and percentage analysis) is used to display the profile of samples. Basic statistics of samples are shown in Table 6.

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 51

Effect of Leadership Styles on Job Stress and Turnover Intention of Indian Insurance Industry

on the relationship among leader’s personality characteristic, the leader behavior, the staff’s job stress and job satisfaction. The research indicated that consideration leadership had significantly negative connection with job stress, but the initiating structure is positively connected with job stress, the leadership style and job stress are negatively connected. Hence, we develop hypothesis as below:

H1 Leadership style has significant influence on job stress

H1a Transformational leadership has negative influence on job stress

H1b Transactional leadership has positive influence on job stress

Job stress is usually generated along with change of productivity such as passive job involvement, indifference to colleagues, envy and suspicion, efficiency drop, job absence, turnover, etc. Parasuraman & Alutto (1984) studied 217 employees of a food manufacturing company and found that job stress had positive connection with turnover intention. Therefore, we propose the hypothesis as follows.

H2 Job stress has positive influence on turnover intention.

Fleishman & Harris (1962) conducted research on relationships among leadership style, turnover rate and complaint rate. The research result reveals that consideration leadership style (transformational) has apparently negative connection with turnover, while initiating structure (transactional) is positively connected with turnover. Therefore, we develop hypotheses as below:

H3 Leadership style has significant influence on turnover intention.

H3a Transformational leadership has negative influence on turnover intention.

H3b Transactional leadership has positive influence on turnover intention.

Wang (1990) made his research on the subject of connection among employee with A-type personality characteristic, leader’s leadership style, and employee’s job stress” and found that people with A-type personality characteristic perceive more job stress than those with B-type, while B-type feels more job stress at low self-respect than those with A-type. Thus, hypotheses are developed as follows.

Construct item

Leadership style 25

Transformation 20

Transaction 5

Job stress 8

Personality characteristics 14

Turnover intention 5

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 201252

Effect of Leadership Styles on Job Stress and Turnover Intention of Indian Insurance Industry

Table 6: Basic Statistics of Samples

9. Statistical Analysis

This research starts with factor analysis of leadership style and then moves to reliability analysis and regression analysis.

Leadership style construct comprises of 33 measurement items. The main components analysis with the variant of orthogonal notation is used to extract the factor. Two factors are extracted and factor’s loading is over 0.7 and the accumulative explained variation is at 67.19%. These two factors are named as transformational leadership and transactional leadership. After factor analysis, 25 items are selected.

Reliability means accuracy of measurement tool. This research adopts Cronbach's a to verify the internal consistency. Roberts & Wortzel (1979) state that Cronbach's a lying in 0.79 to 0.96 means high reliability. For the reliability analysis done for this research, reliability of each construct is over 0.8 (Table 8), which means this research is highly reliable and trustworthy.

Table 7 Cronbach's a of ConstructsThis paper uses regression analysis to study the relationships between predictive variable and criterion variable.

Regression analysis result shown in Table 8 indicates that leadership style has significant connection with job stress. Therefore, the hypothesis H1 is supporte. Furthermore leadership style is divided into transformational style and transactional style to do separate analysis. The result reveals that transformational leadership is negatively connected with job stress. H1a is therefore supported as shown in Table 9. The positive influence of transactional leadership on job stress is not significant, so H1b is not supported as shown in Table 10.

Model Unstandardized Regression Coefficient

Standardized Regression Coefficient

Constant

LeadershipStyle

-.163

B Std. Error

2.967 .288

-.166 .076

t value

10.317

-2.178

Signi-ficance

.000

.031

2R

.027

Beta

Table 8: Regression of Leadership Style on Job Stress

Sex40.3

Item %

Male 71

ContentsNo. of

samples

59.7Female 105

Age

0.5Under 20 1

42.021-30 74

40.031-40 65

16.541-50 29

4.0Over 50 7

2.3Junior High School 4

Education

34.1Senior High School 60

60.2College, University 106

3.4Graduate School or

above6

42.0Married 74Marital Status 58.0

Single (including divorced, widowed)

102

19.9Under 1 year 35

Seniority

34.72-4 years 61

17.65-7 years 31

10.28-10 years 18

17.6Over 11 years 31

Analysis is done on personality characteristics, job stress and turnover intention and finds the interaction effect of personality characteristics *job stress is not significant. It means that personality characteristic has no moderating effect on relationship between job stress and turnover intention as shown in Table 14. Therefore, H5 is not supported.

Adjusted R. Squared = .880 (Adjusted R. Squared = .481)

According to path diagram shown in Figure 2, the result indicates (-0.163) x(0.35)>-.0139. It means that the indirect effect of job stress on leadership style and turnover intention is larger than direct effect, which means job stress has mediating effect on the relationship of leadership style and turnover intention. So the hypothesis H6 is supported.

Fig. 2: Path diagram

10. Conclusions

We choose the insurance industry as the object of study and explore the interrelationship between leadership style and job stress and turnover intention. This research also investigates the variable role of personality characteristic. According to the result of empirical analysis, the following conclusions are generated:

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Effect of Leadership Styles on Job Stress and Turnover Intention of Indian Insurance Industry

Regression analysis of job stress on turnover intention as shown in Table 11 indicates that job stress has positive relationship with turnover intention, H2 is supported. It means that the more job stress, the more turnover intention.

Regression of leadership style on turnover intention as shown in Table 12 indicates that job stress has negative relationship with turnover intention but not significant. H3 is not supported. It means that leadership style has no positive impact on turnover intention. So, no further testing and discussion about H3a and H3b are needed.

Analysis is done on personality characteristic, leadership style and job stress and finds the interaction effect of personality characteristics *leadership style is not significant. It means personality characteristic has no interfering effect on the relationship of leadership style and job stress as shown in Table 13. Therefore, the hypothesis H4 is not supported.

a. R. Squared = .976 (Adjusted R. Squared = .481)

Table 11 Regression of Job Stress on Turnover Intention

Model Unstandardized Regression Coefficient

Standardized Regression Coefficient

Constant

Job Stress .350

B Std. Error

.612 .144

.287 .058

t value

4.247

4.930

Signi-ficance

.000

.000

2R

.123

Beta

Mean Square

F value Significance

Source

Constant

Type III Sum of Squares

df

.477 1.606 .247Personality

Characteristic17.639 37

.722 2.431 .090Leadership Style 42.581 59

Personality Characteristic*

.472 1.591 .249Leadership style 33.064 70

Table 13: Regression Analysis with Interactive Effect on Job Stress

Mean Square

F value Significance

Source

Constant

Type III Sum of Squares

df

.246 .853 .680Personality

Characteristic9.350 38

.701 2.431 .011Job Stress 18.939 27

Personality Characteristic*

.322 1.116 .382Job Stress 26.408 82

Table 14: Regression Analysis with Interactive Effect on Turnover Intention

Table 9: Regression of Transformational Leadership on Job Stress

Model Unstandardized Regression Coefficient

Standardized Regression Coefficient

Constant

Transforma-tional

Leadership-.198

B Std. Error

3.038 .263

-.181 .068

t value

11.560

-2.669

Signi-ficance

.000

.008

2R

.039

Beta

Table 10: Regression of Transactional Leadership on Job Stress Analysis

Model Unstandardized Regression Coefficient

Standardized Regression Coefficient

Constant

Transforma-tional

Leadership.062

B Std. Error

2.069 .232

.055 .067

t value

9.350

.816

Signi-ficance

.000

.416

2R

.004

Beta

Table 12 Regression of Leadership Style on Turnover Intention

Model Unstandardized Regression Coefficient

Standardized Regression Coefficient

Constant

LeadershipStyle

-.139

B Std. Error

1.719 .237

-.117 .063

t value

7.258

-1.858

Signi-ficance

.000

.065

2R

.019

Beta

Leadership

Style

STYLEpattern

Job Stress

Turnover

intention

-0.163* 0.35*

-0.139

Construct No. of Cronbach's áItems

Leadership Style 25 .962

Leadership - transformational 20 .975

Leadership - transactional 5 .833

Job stress 8 .891

Personality Characteristic 14 .882

Turnover Intention 5 .864

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 201252

Effect of Leadership Styles on Job Stress and Turnover Intention of Indian Insurance Industry

Table 6: Basic Statistics of Samples

9. Statistical Analysis

This research starts with factor analysis of leadership style and then moves to reliability analysis and regression analysis.

Leadership style construct comprises of 33 measurement items. The main components analysis with the variant of orthogonal notation is used to extract the factor. Two factors are extracted and factor’s loading is over 0.7 and the accumulative explained variation is at 67.19%. These two factors are named as transformational leadership and transactional leadership. After factor analysis, 25 items are selected.

Reliability means accuracy of measurement tool. This research adopts Cronbach's a to verify the internal consistency. Roberts & Wortzel (1979) state that Cronbach's a lying in 0.79 to 0.96 means high reliability. For the reliability analysis done for this research, reliability of each construct is over 0.8 (Table 8), which means this research is highly reliable and trustworthy.

Table 7 Cronbach's a of ConstructsThis paper uses regression analysis to study the relationships between predictive variable and criterion variable.

Regression analysis result shown in Table 8 indicates that leadership style has significant connection with job stress. Therefore, the hypothesis H1 is supporte. Furthermore leadership style is divided into transformational style and transactional style to do separate analysis. The result reveals that transformational leadership is negatively connected with job stress. H1a is therefore supported as shown in Table 9. The positive influence of transactional leadership on job stress is not significant, so H1b is not supported as shown in Table 10.

Model Unstandardized Regression Coefficient

Standardized Regression Coefficient

Constant

LeadershipStyle

-.163

B Std. Error

2.967 .288

-.166 .076

t value

10.317

-2.178

Signi-ficance

.000

.031

2R

.027

Beta

Table 8: Regression of Leadership Style on Job Stress

Sex40.3

Item %

Male 71

ContentsNo. of

samples

59.7Female 105

Age

0.5Under 20 1

42.021-30 74

40.031-40 65

16.541-50 29

4.0Over 50 7

2.3Junior High School 4

Education

34.1Senior High School 60

60.2College, University 106

3.4Graduate School or

above6

42.0Married 74Marital Status 58.0

Single (including divorced, widowed)

102

19.9Under 1 year 35

Seniority

34.72-4 years 61

17.65-7 years 31

10.28-10 years 18

17.6Over 11 years 31

Analysis is done on personality characteristics, job stress and turnover intention and finds the interaction effect of personality characteristics *job stress is not significant. It means that personality characteristic has no moderating effect on relationship between job stress and turnover intention as shown in Table 14. Therefore, H5 is not supported.

Adjusted R. Squared = .880 (Adjusted R. Squared = .481)

According to path diagram shown in Figure 2, the result indicates (-0.163) x(0.35)>-.0139. It means that the indirect effect of job stress on leadership style and turnover intention is larger than direct effect, which means job stress has mediating effect on the relationship of leadership style and turnover intention. So the hypothesis H6 is supported.

Fig. 2: Path diagram

10. Conclusions

We choose the insurance industry as the object of study and explore the interrelationship between leadership style and job stress and turnover intention. This research also investigates the variable role of personality characteristic. According to the result of empirical analysis, the following conclusions are generated:

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 53

Effect of Leadership Styles on Job Stress and Turnover Intention of Indian Insurance Industry

Regression analysis of job stress on turnover intention as shown in Table 11 indicates that job stress has positive relationship with turnover intention, H2 is supported. It means that the more job stress, the more turnover intention.

Regression of leadership style on turnover intention as shown in Table 12 indicates that job stress has negative relationship with turnover intention but not significant. H3 is not supported. It means that leadership style has no positive impact on turnover intention. So, no further testing and discussion about H3a and H3b are needed.

Analysis is done on personality characteristic, leadership style and job stress and finds the interaction effect of personality characteristics *leadership style is not significant. It means personality characteristic has no interfering effect on the relationship of leadership style and job stress as shown in Table 13. Therefore, the hypothesis H4 is not supported.

a. R. Squared = .976 (Adjusted R. Squared = .481)

Table 11 Regression of Job Stress on Turnover Intention

Model Unstandardized Regression Coefficient

Standardized Regression Coefficient

Constant

Job Stress .350

B Std. Error

.612 .144

.287 .058

t value

4.247

4.930

Signi-ficance

.000

.000

2R

.123

Beta

Mean Square

F value Significance

Source

Constant

Type III Sum of Squares

df

.477 1.606 .247Personality

Characteristic17.639 37

.722 2.431 .090Leadership Style 42.581 59

Personality Characteristic*

.472 1.591 .249Leadership style 33.064 70

Table 13: Regression Analysis with Interactive Effect on Job Stress

Mean Square

F value Significance

Source

Constant

Type III Sum of Squares

df

.246 .853 .680Personality

Characteristic9.350 38

.701 2.431 .011Job Stress 18.939 27

Personality Characteristic*

.322 1.116 .382Job Stress 26.408 82

Table 14: Regression Analysis with Interactive Effect on Turnover Intention

Table 9: Regression of Transformational Leadership on Job Stress

Model Unstandardized Regression Coefficient

Standardized Regression Coefficient

Constant

Transforma-tional

Leadership-.198

B Std. Error

3.038 .263

-.181 .068

t value

11.560

-2.669

Signi-ficance

.000

.008

2R

.039

Beta

Table 10: Regression of Transactional Leadership on Job Stress Analysis

Model Unstandardized Regression Coefficient

Standardized Regression Coefficient

Constant

Transforma-tional

Leadership.062

B Std. Error

2.069 .232

.055 .067

t value

9.350

.816

Signi-ficance

.000

.416

2R

.004

Beta

Table 12 Regression of Leadership Style on Turnover Intention

Model Unstandardized Regression Coefficient

Standardized Regression Coefficient

Constant

LeadershipStyle

-.139

B Std. Error

1.719 .237

-.117 .063

t value

7.258

-1.858

Signi-ficance

.000

.065

2R

.019

Beta

Leadership

Style

STYLEpattern

Job Stress

Turnover

intention

-0.163* 0.35*

-0.139

Construct No. of Cronbach's áItems

Leadership Style 25 .962

Leadership - transformational 20 .975

Leadership - transactional 5 .833

Job stress 8 .891

Personality Characteristic 14 .882

Turnover Intention 5 .864

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 201254

Effect of Leadership Styles on Job Stress and Turnover Intention of Indian Insurance Industry

(i) For the insurance operators, transformational leadership style has negative influence on job stress, which has something to do with the characteristic of insurance industry because the insurance employees have no base pay and the majority of their income comes from sales bonus. Under such bonus system, if the transformational leadership gives more consideration and encouragement, the employees will be aroused instinct of compression resistance for gaining high income.

(ii) Job stress has positive relationship with turnover intention. Job stress usually results in psychological and physical discomfort, and then turnover intention increases.

(iii) The style indicates that leadership style has negative relationship with turnover intention.

(iv) The verification indicates no interfering effect on the relationship between personality characteristics and leadership style and job stress. Such result differs from those of previous researches and property of such industry may probably be the reason. Different personality characteristics do not moderate the leadership style and high compression resistance of the insurance operators.

(v) Personality characteristics bring no moderating effect on the relationship between job stress and turnover intention. Generally speaking, personality characteristic of insurance salespeople are more enthusiastic and compression resistant than that of other business. The bonus system of insurance industry retains salespeople sticking to the post in order to keep getting commission from the client’s policy premium. Therefore, personality characteristic brings no interfering effect on job stress and turnover intention.

(vi) The verification indicates that job stress has bigger indirect effect on leadership style and turnover intention than the direct effect. So, job stress has mediation effect on relationship between leadership style and turnover intention.

11. Managerial Implications

This research chooses insurance industry as object and explores, through regression analysis, the relationship among the insurance leader’s leadership style and the subordinate’s personality characteristic, job stress and turnover intention. According to the conclusion of this

research, following suggestions are provided for management.

(i) Transformational leadership is used to make the subordinates aware that rewards need making efforts. Proper encouragement and consideration are required for future vision and to accomplishment of mutual goal.

(ii) Insurance job has no base pay and the salespeople are highly autonomous. The leader should spend more time in assistance and communication so that the subordinates understand that the real stress comes from economic income pressure but not from the job itself.

12. Limitations

(1) Limitation of Research Scope Because the research object is the insurance industry only, it’s not easy to generalize the research result to other industry.

(2) Limitation of Research Variables This research only considers the variables in question. Other variables such as organizational citizen behavior, organizational climate, job involvement and job efficiency are not taken into investigation.

(3) Limitation of Resources Due to limit of research time, manpower and budget, this research only sent out 220 questionnaires and the sample size is small.

Reference

Davis, K. 1977. Human behavior at work: organizationalbehavior, New York: McGraw- Hill.

Fiedler, F. E. 1971. Validation and extension of the contingency model of leadership effectiveness: A review of empirical findings, Psychological Bulletin, 76, 128-148.

Fiedler, F.E. 1972. The effects of leadership training and experience: A contingency model interpretation, Administration Science Quarterly, 443-468.

Fiedler, F.E. 1978. The contingency model and the dynamics of the leadership process, In Berkowitz, L., Advances in experimental social psychology, New York: Academic Press.

Fisher, C.D. & Gitelson, R. 1983. A meta analysis of the correlates of role conflict and ambiguity, Journal of Applied Psychology, 68(2), 320-333.

commitment, psychosomatic health problem and turnover motivation, Human Relations, 43(8), 715-733.

Lin, Shu-Feng. 2002. The relationships of personality traits, organizational commitment and flow experience: an exploratory study on the female health care volunteers in Chang-hua County. Department of Leisure and Recreation. Da-Yeh University.

Margolis, B.L., Krose, W.H. & Ownn, R.P. 1974. Job stress an unlisted occupational hazard, Journal of Occupational Medicine, 16, 245-258.

Maslow, A.H. 1954. A theory of human motivation, Psychological Review, 50, 370~396.

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 55

Effect of Leadership Styles on Job Stress and Turnover Intention of Indian Insurance Industry

Fleishman, E.A.& Harris, E.F. 1962. Patterns of leadership behavior related to employee grievances and turnover, Personnel Psychology, 15, 43-56.

French, J.R.P. 1974. Adjustment as a person - environment fit, New York: Basic books.

Fry, L.W. 2003. Toward a theory of spiritual leadership, The Leadership Quarterly, 14, 693-727.

Hackley, J.A.1990. Role conflict, coping and stress in clergy wives school of psychology, Fuller Theological Seminary, 328-351.

Hemphill, J.K. & Coons,A.E. 1957. Development of the leader behavior description and measurement, Columbus: Business Research, Ohio State University, 1-18.

Jacobs, T.Q.& Jaques, E. 1990. Military executive leadership”, In Clark, K.E. & Clark, M.B., Measure of Leadership, West Orange, New Jersey: Leadership Library of America, 281-295.

Jamal, M. 1990. Relationship of job stress and type- A behavior to employees’ job satisfaction, organizational

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 201254

Effect of Leadership Styles on Job Stress and Turnover Intention of Indian Insurance Industry

(i) For the insurance operators, transformational leadership style has negative influence on job stress, which has something to do with the characteristic of insurance industry because the insurance employees have no base pay and the majority of their income comes from sales bonus. Under such bonus system, if the transformational leadership gives more consideration and encouragement, the employees will be aroused instinct of compression resistance for gaining high income.

(ii) Job stress has positive relationship with turnover intention. Job stress usually results in psychological and physical discomfort, and then turnover intention increases.

(iii) The style indicates that leadership style has negative relationship with turnover intention.

(iv) The verification indicates no interfering effect on the relationship between personality characteristics and leadership style and job stress. Such result differs from those of previous researches and property of such industry may probably be the reason. Different personality characteristics do not moderate the leadership style and high compression resistance of the insurance operators.

(v) Personality characteristics bring no moderating effect on the relationship between job stress and turnover intention. Generally speaking, personality characteristic of insurance salespeople are more enthusiastic and compression resistant than that of other business. The bonus system of insurance industry retains salespeople sticking to the post in order to keep getting commission from the client’s policy premium. Therefore, personality characteristic brings no interfering effect on job stress and turnover intention.

(vi) The verification indicates that job stress has bigger indirect effect on leadership style and turnover intention than the direct effect. So, job stress has mediation effect on relationship between leadership style and turnover intention.

11. Managerial Implications

This research chooses insurance industry as object and explores, through regression analysis, the relationship among the insurance leader’s leadership style and the subordinate’s personality characteristic, job stress and turnover intention. According to the conclusion of this

research, following suggestions are provided for management.

(i) Transformational leadership is used to make the subordinates aware that rewards need making efforts. Proper encouragement and consideration are required for future vision and to accomplishment of mutual goal.

(ii) Insurance job has no base pay and the salespeople are highly autonomous. The leader should spend more time in assistance and communication so that the subordinates understand that the real stress comes from economic income pressure but not from the job itself.

12. Limitations

(1) Limitation of Research Scope Because the research object is the insurance industry only, it’s not easy to generalize the research result to other industry.

(2) Limitation of Research Variables This research only considers the variables in question. Other variables such as organizational citizen behavior, organizational climate, job involvement and job efficiency are not taken into investigation.

(3) Limitation of Resources Due to limit of research time, manpower and budget, this research only sent out 220 questionnaires and the sample size is small.

Reference

Davis, K. 1977. Human behavior at work: organizationalbehavior, New York: McGraw- Hill.

Fiedler, F. E. 1971. Validation and extension of the contingency model of leadership effectiveness: A review of empirical findings, Psychological Bulletin, 76, 128-148.

Fiedler, F.E. 1972. The effects of leadership training and experience: A contingency model interpretation, Administration Science Quarterly, 443-468.

Fiedler, F.E. 1978. The contingency model and the dynamics of the leadership process, In Berkowitz, L., Advances in experimental social psychology, New York: Academic Press.

Fisher, C.D. & Gitelson, R. 1983. A meta analysis of the correlates of role conflict and ambiguity, Journal of Applied Psychology, 68(2), 320-333.

commitment, psychosomatic health problem and turnover motivation, Human Relations, 43(8), 715-733.

Lin, Shu-Feng. 2002. The relationships of personality traits, organizational commitment and flow experience: an exploratory study on the female health care volunteers in Chang-hua County. Department of Leisure and Recreation. Da-Yeh University.

Margolis, B.L., Krose, W.H. & Ownn, R.P. 1974. Job stress an unlisted occupational hazard, Journal of Occupational Medicine, 16, 245-258.

Maslow, A.H. 1954. A theory of human motivation, Psychological Review, 50, 370~396.

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 55

Effect of Leadership Styles on Job Stress and Turnover Intention of Indian Insurance Industry

Fleishman, E.A.& Harris, E.F. 1962. Patterns of leadership behavior related to employee grievances and turnover, Personnel Psychology, 15, 43-56.

French, J.R.P. 1974. Adjustment as a person - environment fit, New York: Basic books.

Fry, L.W. 2003. Toward a theory of spiritual leadership, The Leadership Quarterly, 14, 693-727.

Hackley, J.A.1990. Role conflict, coping and stress in clergy wives school of psychology, Fuller Theological Seminary, 328-351.

Hemphill, J.K. & Coons,A.E. 1957. Development of the leader behavior description and measurement, Columbus: Business Research, Ohio State University, 1-18.

Jacobs, T.Q.& Jaques, E. 1990. Military executive leadership”, In Clark, K.E. & Clark, M.B., Measure of Leadership, West Orange, New Jersey: Leadership Library of America, 281-295.

Jamal, M. 1990. Relationship of job stress and type- A behavior to employees’ job satisfaction, organizational

Role of Commercial Banks in Agricultural Credit in India

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 57

without efficient linkages and financing options for which the farmers have fallen prey to middlemen and moneylenders. In many cases, low quality agricultural inputs, some times even spurious products, affects productivity, and that tends to trap the farmer deeper into poverty. One cannot afford to leave the agriculture sector to the vicissitudes of an imperfect market. With intermittent failure of the monsoons and other drawbacks of farming, rural indebtedness has been a serious and continuous characteristic of Indian Agriculture. Because of the high risk inherent in traditional farming activity, the prevalence of high interest rates was the norm rather than the exception.

The 59th National Sample Survey pointed out that of Rs.1000 in the loan availed by farmers, the share of banks is Rs.356, share of a cooperative society is Rs.196, share of money lenders is Rs.257 and the remaining Rs.191 is availed from relatives, friends and others. Also findings highlighted that only 27% of the total number of cultivator households received credit from formal sources while 22% received credit from informal sources. The remaining households, comprising mainly small and marginal farmers, had no credit outstanding. It felt that, there is a need for innovation in credit delivery mechanism for alleviating poverty and larger coverage of rural households. Outreach of banking sector needs to be increased. Necessary legal and regulatory framework for operation of non-banking channel viz. NGOs, Micro Finance Institutions and village organizations are needed.

Planning Commission (2001) in its Report of the working group on crop husbandry, demand & supply projections and agricultural inputs for the tenth five year plan mentioned that agricultural credit is disbursed through the network of cooperatives, commercial banks and RRBs. Cooperatives cover 48 per cent of disbursement, commercial banks 46 per cent and RRBs about 6 per cent. The cooperative credit system has played a very important role till a few years back. However, the system seems to have collapsed due to heavy overdues and it has affected the resources poor farmers badly. Commercial Banks do not seem to be much interested in providing credit to farmers as is evident from shortfall in priority lending. Against the target of 18 per cent of the Net Bank Credit, the priority sector lending amounted to only 15.7 per cent (2000-01). The flow of credit from the Commercial Banks and the RRBs is not adequate. Apart from the question of the quantum of credit, there is the question of specific targeting of the small and marginal farmers. As there is a separate Working Group on Agricultural Credit, this Working Group do not intent to make any recommendations, however, it emphasises that unless credit needs of the farmers are adequately met the productivity enhancement programme will suffer as

farmers would not be able to adopt improved technologies and develop their on farm infrastructure.

From review of literature it can conclude that agriculture sector plays a significant role in Indian economy. This sector needs huge investment for the purchase of capital inputs and working capital. According to government data, share of marginal and small farmers are (farmers owning from 0.1 to less than 2 ha) approximately 82 percent in 2000-01 in total forming community. It is also estimated that only 27% of the total number of cultivator households received credit from formal sources while 22% received credit from informal sources. The remaining households like mainly small and marginal farmers are not getting loan from any sources. In recent years, commercial banks are playing very important role in agricultural credit delivery.

3. Objectives

1) To identify the performance of commercial banks in agriculture credit delivery.

2) To study and analyze the share of commercial banks in agriculture credit.

3) To study the various schemes introduced by commercial banks to cater the needs of agriculture sector.

4) To suggest measures to the policy makers to extend agricultural credit effectively.

4. Research Methodology

The study basically depends on secondary data. The data has been taken for the last Five years (2005-06 to 2010-11) to analyze the performance of commercial banks in agricultural credit. The study attempts to accomplish its objectives by making analysis on the basis of the following parameters:

1. Relative Share of Borrowing of Cultivator Households from Different Sources;

2. Institutional Credit Agriculture Sector; 3. Priority Sector Lending by Public Sector Banks; 4. Performance of Kisan Credit Cards Schemes; 5. Role of Commercial Banks in Financial Inclusion6. Holding land wise credit flow by commercial banks; 7. Distribution of Commercial Bank Branches in India; 8. Number of banks achieved net bank credit targets; 9. Agricultural Advances Recovery by institutions; 10. Priority Sector Shortfall - Contribution to RIDF by

commercial banks; 11. Farmers deposits in commercial banks;

All the parameters have been analyzed for the period of five years, i.e., from 2005-06 to 2010-11

ABSTRACT

Agriculture including allied activities, accounted for 14.5 per cent of gross domestic product (GDP) at

2004-05 prices, in 2010-11 as compared to 14.7 per cent in 2009-10. Notwithstanding the declining

trend in agriculture’s share in the GDP, it is critical from the income distribution perspective as it accounted

for about 58 per cent employment in the country according to Census 2001. Agricultural credit has

played a vital role in supporting farm production in India. It has also been estimated that one per cent

growth in agriculture contributes to two per cent growth in industrial and service sectors. Though, the

outreach and amount of agricultural credit increased over the years, several weaknesses crept which in

turn affected the viability and sustainability of banking and other institutions. The present paper analyses

the performance of commercial banks in agricultural credit delivery. The paper also analyses the latest

schemes of commercial banks for credit delivery.

Key words: Gross Domestic Product, Marginal Farmer, Credit.

1. Introduction

Growth in agriculture and allied sectors is essential for economic growth of a country. In terms of composition, out of the total share of 14.5 per cent that agriculture and allied sectors had in GDP at 2004-05 in 2010-11, agriculture alone accounted for 12.3 per cent, followed by forestry and logging at 1.4 per cent and fishing at 0.7 per cent. Reasonable growth in agriculture is important both from the nutritional point of view as well as to control food prices and overall headline inflation.

Agriculture sector needs huge investment, realizing the importance of farm credit, both central and state governments are undertaking initiatives to meet the credit requirements of farmers. Reserve Bank of India, Ministry of Finance, NABARD, and all other banking institutions are gearing up for the task of strengthening the institutional framework for effective credit delivery. Achieving growth in agricultural sector is essential for maintaining self-sufficiency in food. It has also been estimated that one per cent growth in agriculture contributes to two per cent growth in industrial and service sectors. The importance of agriculture credit as a critical input to agriculture is

reinforced by the unique role of Indian agriculture in the macroeconomic framework and its role in poverty alleviation. Recognizing the importance of the agriculture sector in India’s development, the government and the Reserve Bank of India (RBI) have played a vital role in creating a broad-based institutional framework for catering to the increasing credit requirements of the sector. Agriculture polices in India have been reviewed from time to time to maintain pace with the changing requirements of the agriculture sector, which forms an important segment of the priority sector lending of scheduled commercial banks and target of 18 per cent of net banking credit has been stipulated for the sector.

2. Review of literature

Somnath Chatterjee (2007) in his article “The developmental challenge in rural India” stated agriculture in India has always been heavily dependent on the monsoons and hence has been an inherently risky proposition for farming community. Indigenous system of credit had evolved as a consequence of seasonal needs. 87 per cent of villages in India are in clusters of population of 2,000 or below. These villages provide small markets

Role of Commercial Banks in Agricultural Credit in India

Dr. Rajesh C. Jampala*Dr. P. Adi Lakshmi**

Mr. Srinivasa Rao Dokku***

*Professor & Head, P.B. Siddhartha College of Arts and Science, Vijayawada, Andhra Pradesh

**Professor & Head, P.V.P. Siddhartha Institute of Technology, Vijayawada, Andhra Pradesh

***Assistant Professor, P.V.P. Siddhartha Institute of Technology, Vijayawada, Andhra Pradesh

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 201256

Role of Commercial Banks in Agricultural Credit in India

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 57

without efficient linkages and financing options for which the farmers have fallen prey to middlemen and moneylenders. In many cases, low quality agricultural inputs, some times even spurious products, affects productivity, and that tends to trap the farmer deeper into poverty. One cannot afford to leave the agriculture sector to the vicissitudes of an imperfect market. With intermittent failure of the monsoons and other drawbacks of farming, rural indebtedness has been a serious and continuous characteristic of Indian Agriculture. Because of the high risk inherent in traditional farming activity, the prevalence of high interest rates was the norm rather than the exception.

The 59th National Sample Survey pointed out that of Rs.1000 in the loan availed by farmers, the share of banks is Rs.356, share of a cooperative society is Rs.196, share of money lenders is Rs.257 and the remaining Rs.191 is availed from relatives, friends and others. Also findings highlighted that only 27% of the total number of cultivator households received credit from formal sources while 22% received credit from informal sources. The remaining households, comprising mainly small and marginal farmers, had no credit outstanding. It felt that, there is a need for innovation in credit delivery mechanism for alleviating poverty and larger coverage of rural households. Outreach of banking sector needs to be increased. Necessary legal and regulatory framework for operation of non-banking channel viz. NGOs, Micro Finance Institutions and village organizations are needed.

Planning Commission (2001) in its Report of the working group on crop husbandry, demand & supply projections and agricultural inputs for the tenth five year plan mentioned that agricultural credit is disbursed through the network of cooperatives, commercial banks and RRBs. Cooperatives cover 48 per cent of disbursement, commercial banks 46 per cent and RRBs about 6 per cent. The cooperative credit system has played a very important role till a few years back. However, the system seems to have collapsed due to heavy overdues and it has affected the resources poor farmers badly. Commercial Banks do not seem to be much interested in providing credit to farmers as is evident from shortfall in priority lending. Against the target of 18 per cent of the Net Bank Credit, the priority sector lending amounted to only 15.7 per cent (2000-01). The flow of credit from the Commercial Banks and the RRBs is not adequate. Apart from the question of the quantum of credit, there is the question of specific targeting of the small and marginal farmers. As there is a separate Working Group on Agricultural Credit, this Working Group do not intent to make any recommendations, however, it emphasises that unless credit needs of the farmers are adequately met the productivity enhancement programme will suffer as

farmers would not be able to adopt improved technologies and develop their on farm infrastructure.

From review of literature it can conclude that agriculture sector plays a significant role in Indian economy. This sector needs huge investment for the purchase of capital inputs and working capital. According to government data, share of marginal and small farmers are (farmers owning from 0.1 to less than 2 ha) approximately 82 percent in 2000-01 in total forming community. It is also estimated that only 27% of the total number of cultivator households received credit from formal sources while 22% received credit from informal sources. The remaining households like mainly small and marginal farmers are not getting loan from any sources. In recent years, commercial banks are playing very important role in agricultural credit delivery.

3. Objectives

1) To identify the performance of commercial banks in agriculture credit delivery.

2) To study and analyze the share of commercial banks in agriculture credit.

3) To study the various schemes introduced by commercial banks to cater the needs of agriculture sector.

4) To suggest measures to the policy makers to extend agricultural credit effectively.

4. Research Methodology

The study basically depends on secondary data. The data has been taken for the last Five years (2005-06 to 2010-11) to analyze the performance of commercial banks in agricultural credit. The study attempts to accomplish its objectives by making analysis on the basis of the following parameters:

1. Relative Share of Borrowing of Cultivator Households from Different Sources;

2. Institutional Credit Agriculture Sector; 3. Priority Sector Lending by Public Sector Banks; 4. Performance of Kisan Credit Cards Schemes; 5. Role of Commercial Banks in Financial Inclusion6. Holding land wise credit flow by commercial banks; 7. Distribution of Commercial Bank Branches in India; 8. Number of banks achieved net bank credit targets; 9. Agricultural Advances Recovery by institutions; 10. Priority Sector Shortfall - Contribution to RIDF by

commercial banks; 11. Farmers deposits in commercial banks;

All the parameters have been analyzed for the period of five years, i.e., from 2005-06 to 2010-11

ABSTRACT

Agriculture including allied activities, accounted for 14.5 per cent of gross domestic product (GDP) at

2004-05 prices, in 2010-11 as compared to 14.7 per cent in 2009-10. Notwithstanding the declining

trend in agriculture’s share in the GDP, it is critical from the income distribution perspective as it accounted

for about 58 per cent employment in the country according to Census 2001. Agricultural credit has

played a vital role in supporting farm production in India. It has also been estimated that one per cent

growth in agriculture contributes to two per cent growth in industrial and service sectors. Though, the

outreach and amount of agricultural credit increased over the years, several weaknesses crept which in

turn affected the viability and sustainability of banking and other institutions. The present paper analyses

the performance of commercial banks in agricultural credit delivery. The paper also analyses the latest

schemes of commercial banks for credit delivery.

Key words: Gross Domestic Product, Marginal Farmer, Credit.

1. Introduction

Growth in agriculture and allied sectors is essential for economic growth of a country. In terms of composition, out of the total share of 14.5 per cent that agriculture and allied sectors had in GDP at 2004-05 in 2010-11, agriculture alone accounted for 12.3 per cent, followed by forestry and logging at 1.4 per cent and fishing at 0.7 per cent. Reasonable growth in agriculture is important both from the nutritional point of view as well as to control food prices and overall headline inflation.

Agriculture sector needs huge investment, realizing the importance of farm credit, both central and state governments are undertaking initiatives to meet the credit requirements of farmers. Reserve Bank of India, Ministry of Finance, NABARD, and all other banking institutions are gearing up for the task of strengthening the institutional framework for effective credit delivery. Achieving growth in agricultural sector is essential for maintaining self-sufficiency in food. It has also been estimated that one per cent growth in agriculture contributes to two per cent growth in industrial and service sectors. The importance of agriculture credit as a critical input to agriculture is

reinforced by the unique role of Indian agriculture in the macroeconomic framework and its role in poverty alleviation. Recognizing the importance of the agriculture sector in India’s development, the government and the Reserve Bank of India (RBI) have played a vital role in creating a broad-based institutional framework for catering to the increasing credit requirements of the sector. Agriculture polices in India have been reviewed from time to time to maintain pace with the changing requirements of the agriculture sector, which forms an important segment of the priority sector lending of scheduled commercial banks and target of 18 per cent of net banking credit has been stipulated for the sector.

2. Review of literature

Somnath Chatterjee (2007) in his article “The developmental challenge in rural India” stated agriculture in India has always been heavily dependent on the monsoons and hence has been an inherently risky proposition for farming community. Indigenous system of credit had evolved as a consequence of seasonal needs. 87 per cent of villages in India are in clusters of population of 2,000 or below. These villages provide small markets

Role of Commercial Banks in Agricultural Credit in India

Dr. Rajesh C. Jampala*Dr. P. Adi Lakshmi**

Mr. Srinivasa Rao Dokku***

*Professor & Head, P.B. Siddhartha College of Arts and Science, Vijayawada, Andhra Pradesh

**Professor & Head, P.V.P. Siddhartha Institute of Technology, Vijayawada, Andhra Pradesh

***Assistant Professor, P.V.P. Siddhartha Institute of Technology, Vijayawada, Andhra Pradesh

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 201256

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 59

Role of Commercial Banks in Agricultural Credit in India

long-term) provided by co-operative banks, regional rural banks and commercial banks to the agricultural sector during the period 2006-07 to 2010-11. The total credit facilities extended by co-operative banks, regional rural banks and commercial banks were Rs. 2,29,400 crore in 2006-07, which increased to Rs. 446,779 crore in 2010-11, the share of Co-operative banks was only Rs. 42,480 crore in 2006-07, which rise to Rs. 70,105 crore in 2010-11 an increase of 165 per cent. The share of regional rural banks was Rs. 20,435 crore in 2006-07, which increased to Rs. 43,968 crore in 2010-11 an increase of 215 per cent. Credit facilities provided by commercial banks were Rs. 1,66,485 crore in 2006-07, which increased to Rs. 332,706 crore in 2010-11, it shows an increase of 200 per cent respectively. The share of co-operative banks in the farm credit was 16 to 19 per cent, regional rural banks 8 to 10 per cent and commercial banks 71 to 75 per cent, from last few years the total farm sector lending, the share of commercial banks was more than the regional rural banks and co-operative banks.

5.4 Priority Sector Lending by Public Sector Banks:Commercial Banks were subjected to priority sector lending targets in 1983 on account of an important role played by these institutions in purveying banking facilities to low and middle income groups from urban and semi-urban areas. Presently, UCBs have to extend 40 per cent of their Adjusted Net Bank Credit (ANBC) or credit equivalent of Off-Balance Sheet Exposure (OBE), whichever is higher, as on March 31 of the previous year, to priority sectors. Of this target, at least 25 per cent needs to be given to weaker sections of the society. However, unlike SCBs, UCBs are not bound by any separate target for agriculture given the primarily urban focus of these banks.

From the above Table 3 it is clear that the total priority sector advances by public sector banks accounted for 41.3 per cent (2010-11) of their net bank credit (NBC) compared with 41.6 per cent (2009-10). Within the priority sector, the flow of credit to agriculture from Public Sector is increased from 12.3 per cent in 2006-07 to 16.5 percent in 2010-11. This highlights that the commercial

banks are achieving its agricultural credit during the study period except one year.

5.5 Kisan Credit Card Scheme:The Kisan Credit Card (KCC) scheme (introduced in 1998-99) has been implemented through cooperative banks, RRBs and public sector commercial banks to provide an easy access to adequate, timely and cost effective credit to farmers. In addition to meeting the term credit and working capital requirements of agriculture, KCC also covers consumption credit needs of farmers. The endeavour of National Bank for Agriculture and Rural Development (NABARD) has been to bring all farmers including tenant farmers and share croppers into the ambit of KCC.

From the above Table 4 it is obvious that during 2010-11, 7.26 million KCC were issued by banks with sanctioned credit limit of Rs 43,370 crore as against 9.01 milion cards and credit limits of Rs 34,982 crore during 2009-10. Of the cumulative 100.93 million credit cards issued, as at end- March 2011, 45.03 million cards (44.62%) were issued by commercial banks, followed by 40.70 million cards (40.33%) by co-operative banks and 15.20 million cards (15.05%) by Regional Rural Banks.

5.6 Role of Commercial Banks in Financial Inclusion:Commercial banks are playing a vital role in financial inclusion in India. It is delivering credit to the needed people with different schemes. Financial inclusion had been one of the top priorities of the Reserve Bank during the recent years. Accordingly, the Reserve Bank had been encouraging the banking sector to expand the banking network both through setting up of new branches and also through BC model by leveraging upon the information and communication technology (ICT). Consequently, the status of financial inclusion improved in 2010-11 over the previous year.

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 201258

Role of Commercial Banks in Agricultural Credit in India

5. Results and Discussions

The following section provides the discussion on various parameters selected for the analysis of the study.

5.1 Rural Credit System:The rural credit system in the country has undergone radical changes in respect of focus, structure and approach over the time. The institutionalization of credit started with an establishment of co-operatives following the enactment of Co-operative Societies Act, 1904. The key milestone of rural credit system are Rural Credit Survey Committee Report (1954) and acceptance of its recommendations, nationalization of major commercial banks (1969 and 1980), establishment of RRBs (1975), establishment of NABARD (1982) and the ongoing financial sector reforms since 1991. Further, several initiatives like Kisan Credit Card Scheme, Special Agricultural Credit Plans, RIDF Scheme etc, are put together to increase the flow of credit to agriculture sector. An important development in this regard is the phenomenal growth of Self-Help Groups since 1990s.

5.2 Relative Share of Borrowing of Cultivator Households from Different Sources:Nationalization of banks in 1969 transformed the banking industry beyond recognition. Branch networks of the banks grew significantly reaching across the entire country and the nation saw banking being taken to the masses. Almost two and a half decades of directed, production-based, subsidized social lending were witnessed. Towards the end of this phase, the economy began to buckle under the strain of internal inefficiencies and external pressures. The early 1990s saw major reforms being implemented to shore up the national economy and banking. By the end of the decade, stability had been restored and the first few years of the 21st century have seen the economy on a growth path. During the period after nationalization, the number of bank branches has grown eightfold from 8187 in 1969 to 74,130 at the end of 2007. With the rapid spread of branch networks of banks, the number of customers per branch declined fourfold from 64,000 to 13,466. Consequently, the coverage in terms of total number of customers has more than doubled. The following section deals with successful schemes of commercial banks for financial inclusion in India.

Commercial Banks are plays a significant role in lending loans and advances to agricultural sector in India. After nationalization of commercial banks, agricultural credit has increased substantially. One of the major achievements in the post-independent India has been widening the spread of institutional machinery for credit and decline in the role of non-institutional sources, notwithstanding some reversal in the trend observed

particularly in the 1990s. The share of institutional credit, which was little over 7 per cent in 1951, increased manifold to over 66 per cent in 1991, reflecting concomitantly a remarkable decline in the share of non-institutional credit from around 93 per cent to about 31 per cent during the same period. However, the latest NSSO Survey reveals that the share of non-institutional credit has taken a reverse swing which is a cause of concern as shown in following Table 1.

Table 1: Relative Share of Borrowing of Cultivator Households from Different Sources

From the above Table 1 it is clear that non-institutional credit decreases from 92.7 percent (1951) to 38.9 percent (2002). Institutional credit on the other hand, increases from 7.3 percent (1951) to 61.1 percent (2002). Further, the share of money lenders also declined from 69.7 percent (1951) to 26.8 percent (2002). On the other hand, the share of borrowings from cooperative societies/banks had increased from 3.3 percent (1951) to 30.2 percent (2002) respectively. Finally, for commercial banks, the share of borrowings increases from 0.9 percent (1951) to 26.3 percent (2002).

5.3 Institutional Credit Agriculture Sector- Commercial Bank share:

The above Table 2 indicates the total amount of institutional credit (both short term and medium-term/

(Per cent)

Sources Credit 1951 1961 1971 1981 1991 2002

Non-Institutional 92.7 81.3 68.3 36.8 30.6 38.9

of which Money Lenders 69.7 49.2 36.1 16.1 17.5 26.8

Institutional 7.3 18.7 31.7 63.2 66.3 61.1

of which CooperativesSocieties / Banks 3.3 2.6 22.0 29.8 23.6 30.2

Commercial Banks 0.9 0.6 2.4 28.8 35.2 26.3

Unspecified – – – – 3.1 –

Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: All India Debt and Investment Survey and NSSO, 2003.

Table 2: Institutional Credit Flow to Agriculture Sector in India

Year Co-operative banks

Regional banks

2006-07

(Rs.crore)

42,480

Commercial banks

Total

Rs. Crore

2,29,400

Percent

18

(Rs.crore)

20,435

Percent

9

(Rs.crore)

1,66,485

Percent

73

2007-08 48,258 2,54,65819 25,312 10 181,088 71

2008-09 45,966 301,908**15 26,765 8 228,951 77

2009-10 63,497 384,51416 35,217 9 285,800 75

2010-11 70,105 446,77916 43,968 9 332,706 75

Source: NABARD Includes Rs 226 crore by other Agencies.

Table 3: Priority Sector Lending by Public Sector Banks

Year

2006-07

2007-08

2008-09

2009-10

2010-11

Source: RBI, RTPB, various years

Agriculture

1,73,875 (12.3)

2,49,397 (18.3)

2,98,211 (17.2)

3,72,463 (17.9)

4,14,991 (16.5)

Small-Scale Industries

91,020 (6.5)

1,51,137 (11.1)

1,91,307 (11.3)

2,76,319 (13.3)

3,76,625 (15.1)

Total priority sector advances

5,10,175 (36.1)

6,10,450 (44.7)

7,20,083 (42.5)

8,63,777(41.6)

10,28,615(41.3)

(Rs. crore)

Table 4: Number of Kisan Credit Cards Issued (As at end-March 2009)

Year

2006-07

2007-08

2008-09

2009-10

2010-11

* Data for commercial banks available up to 30 June 2010. # Since inception of the Scheme, i.e., August 1998.

RRBs Commercial Banks

Total

(Numbers in million)

Cooperative Banks

2.29

2.09

1.34

1.74

2.81

Cumulative# 40.70

1.41

1.77

1.41

1.95

1.78

15.20

4.81

4.61

5.83

5.31

2.67*

45.03

8.51

8.47

8.59

9.01

7.26

100.93

Source: NABARD.

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 59

Role of Commercial Banks in Agricultural Credit in India

long-term) provided by co-operative banks, regional rural banks and commercial banks to the agricultural sector during the period 2006-07 to 2010-11. The total credit facilities extended by co-operative banks, regional rural banks and commercial banks were Rs. 2,29,400 crore in 2006-07, which increased to Rs. 446,779 crore in 2010-11, the share of Co-operative banks was only Rs. 42,480 crore in 2006-07, which rise to Rs. 70,105 crore in 2010-11 an increase of 165 per cent. The share of regional rural banks was Rs. 20,435 crore in 2006-07, which increased to Rs. 43,968 crore in 2010-11 an increase of 215 per cent. Credit facilities provided by commercial banks were Rs. 1,66,485 crore in 2006-07, which increased to Rs. 332,706 crore in 2010-11, it shows an increase of 200 per cent respectively. The share of co-operative banks in the farm credit was 16 to 19 per cent, regional rural banks 8 to 10 per cent and commercial banks 71 to 75 per cent, from last few years the total farm sector lending, the share of commercial banks was more than the regional rural banks and co-operative banks.

5.4 Priority Sector Lending by Public Sector Banks:Commercial Banks were subjected to priority sector lending targets in 1983 on account of an important role played by these institutions in purveying banking facilities to low and middle income groups from urban and semi-urban areas. Presently, UCBs have to extend 40 per cent of their Adjusted Net Bank Credit (ANBC) or credit equivalent of Off-Balance Sheet Exposure (OBE), whichever is higher, as on March 31 of the previous year, to priority sectors. Of this target, at least 25 per cent needs to be given to weaker sections of the society. However, unlike SCBs, UCBs are not bound by any separate target for agriculture given the primarily urban focus of these banks.

From the above Table 3 it is clear that the total priority sector advances by public sector banks accounted for 41.3 per cent (2010-11) of their net bank credit (NBC) compared with 41.6 per cent (2009-10). Within the priority sector, the flow of credit to agriculture from Public Sector is increased from 12.3 per cent in 2006-07 to 16.5 percent in 2010-11. This highlights that the commercial

banks are achieving its agricultural credit during the study period except one year.

5.5 Kisan Credit Card Scheme:The Kisan Credit Card (KCC) scheme (introduced in 1998-99) has been implemented through cooperative banks, RRBs and public sector commercial banks to provide an easy access to adequate, timely and cost effective credit to farmers. In addition to meeting the term credit and working capital requirements of agriculture, KCC also covers consumption credit needs of farmers. The endeavour of National Bank for Agriculture and Rural Development (NABARD) has been to bring all farmers including tenant farmers and share croppers into the ambit of KCC.

From the above Table 4 it is obvious that during 2010-11, 7.26 million KCC were issued by banks with sanctioned credit limit of Rs 43,370 crore as against 9.01 milion cards and credit limits of Rs 34,982 crore during 2009-10. Of the cumulative 100.93 million credit cards issued, as at end- March 2011, 45.03 million cards (44.62%) were issued by commercial banks, followed by 40.70 million cards (40.33%) by co-operative banks and 15.20 million cards (15.05%) by Regional Rural Banks.

5.6 Role of Commercial Banks in Financial Inclusion:Commercial banks are playing a vital role in financial inclusion in India. It is delivering credit to the needed people with different schemes. Financial inclusion had been one of the top priorities of the Reserve Bank during the recent years. Accordingly, the Reserve Bank had been encouraging the banking sector to expand the banking network both through setting up of new branches and also through BC model by leveraging upon the information and communication technology (ICT). Consequently, the status of financial inclusion improved in 2010-11 over the previous year.

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 201258

Role of Commercial Banks in Agricultural Credit in India

5. Results and Discussions

The following section provides the discussion on various parameters selected for the analysis of the study.

5.1 Rural Credit System:The rural credit system in the country has undergone radical changes in respect of focus, structure and approach over the time. The institutionalization of credit started with an establishment of co-operatives following the enactment of Co-operative Societies Act, 1904. The key milestone of rural credit system are Rural Credit Survey Committee Report (1954) and acceptance of its recommendations, nationalization of major commercial banks (1969 and 1980), establishment of RRBs (1975), establishment of NABARD (1982) and the ongoing financial sector reforms since 1991. Further, several initiatives like Kisan Credit Card Scheme, Special Agricultural Credit Plans, RIDF Scheme etc, are put together to increase the flow of credit to agriculture sector. An important development in this regard is the phenomenal growth of Self-Help Groups since 1990s.

5.2 Relative Share of Borrowing of Cultivator Households from Different Sources:Nationalization of banks in 1969 transformed the banking industry beyond recognition. Branch networks of the banks grew significantly reaching across the entire country and the nation saw banking being taken to the masses. Almost two and a half decades of directed, production-based, subsidized social lending were witnessed. Towards the end of this phase, the economy began to buckle under the strain of internal inefficiencies and external pressures. The early 1990s saw major reforms being implemented to shore up the national economy and banking. By the end of the decade, stability had been restored and the first few years of the 21st century have seen the economy on a growth path. During the period after nationalization, the number of bank branches has grown eightfold from 8187 in 1969 to 74,130 at the end of 2007. With the rapid spread of branch networks of banks, the number of customers per branch declined fourfold from 64,000 to 13,466. Consequently, the coverage in terms of total number of customers has more than doubled. The following section deals with successful schemes of commercial banks for financial inclusion in India.

Commercial Banks are plays a significant role in lending loans and advances to agricultural sector in India. After nationalization of commercial banks, agricultural credit has increased substantially. One of the major achievements in the post-independent India has been widening the spread of institutional machinery for credit and decline in the role of non-institutional sources, notwithstanding some reversal in the trend observed

particularly in the 1990s. The share of institutional credit, which was little over 7 per cent in 1951, increased manifold to over 66 per cent in 1991, reflecting concomitantly a remarkable decline in the share of non-institutional credit from around 93 per cent to about 31 per cent during the same period. However, the latest NSSO Survey reveals that the share of non-institutional credit has taken a reverse swing which is a cause of concern as shown in following Table 1.

Table 1: Relative Share of Borrowing of Cultivator Households from Different Sources

From the above Table 1 it is clear that non-institutional credit decreases from 92.7 percent (1951) to 38.9 percent (2002). Institutional credit on the other hand, increases from 7.3 percent (1951) to 61.1 percent (2002). Further, the share of money lenders also declined from 69.7 percent (1951) to 26.8 percent (2002). On the other hand, the share of borrowings from cooperative societies/banks had increased from 3.3 percent (1951) to 30.2 percent (2002) respectively. Finally, for commercial banks, the share of borrowings increases from 0.9 percent (1951) to 26.3 percent (2002).

5.3 Institutional Credit Agriculture Sector- Commercial Bank share:

The above Table 2 indicates the total amount of institutional credit (both short term and medium-term/

(Per cent)

Sources Credit 1951 1961 1971 1981 1991 2002

Non-Institutional 92.7 81.3 68.3 36.8 30.6 38.9

of which Money Lenders 69.7 49.2 36.1 16.1 17.5 26.8

Institutional 7.3 18.7 31.7 63.2 66.3 61.1

of which CooperativesSocieties / Banks 3.3 2.6 22.0 29.8 23.6 30.2

Commercial Banks 0.9 0.6 2.4 28.8 35.2 26.3

Unspecified – – – – 3.1 –

Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: All India Debt and Investment Survey and NSSO, 2003.

Table 2: Institutional Credit Flow to Agriculture Sector in India

Year Co-operative banks

Regional banks

2006-07

(Rs.crore)

42,480

Commercial banks

Total

Rs. Crore

2,29,400

Percent

18

(Rs.crore)

20,435

Percent

9

(Rs.crore)

1,66,485

Percent

73

2007-08 48,258 2,54,65819 25,312 10 181,088 71

2008-09 45,966 301,908**15 26,765 8 228,951 77

2009-10 63,497 384,51416 35,217 9 285,800 75

2010-11 70,105 446,77916 43,968 9 332,706 75

Source: NABARD Includes Rs 226 crore by other Agencies.

Table 3: Priority Sector Lending by Public Sector Banks

Year

2006-07

2007-08

2008-09

2009-10

2010-11

Source: RBI, RTPB, various years

Agriculture

1,73,875 (12.3)

2,49,397 (18.3)

2,98,211 (17.2)

3,72,463 (17.9)

4,14,991 (16.5)

Small-Scale Industries

91,020 (6.5)

1,51,137 (11.1)

1,91,307 (11.3)

2,76,319 (13.3)

3,76,625 (15.1)

Total priority sector advances

5,10,175 (36.1)

6,10,450 (44.7)

7,20,083 (42.5)

8,63,777(41.6)

10,28,615(41.3)

(Rs. crore)

Table 4: Number of Kisan Credit Cards Issued (As at end-March 2009)

Year

2006-07

2007-08

2008-09

2009-10

2010-11

* Data for commercial banks available up to 30 June 2010. # Since inception of the Scheme, i.e., August 1998.

RRBs Commercial Banks

Total

(Numbers in million)

Cooperative Banks

2.29

2.09

1.34

1.74

2.81

Cumulative# 40.70

1.41

1.77

1.41

1.95

1.78

15.20

4.81

4.61

5.83

5.31

2.67*

45.03

8.51

8.47

8.59

9.01

7.26

100.93

Source: NABARD.

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 61

Role of Commercial Banks in Agricultural Credit in India

established an impressive branch network: about 82,034 branches of scheduled commercial banks (including RRBs) and over one-lakh outlets of cooperatives in rural and semi-urban areas.

From the above Table 7 it is obvious that the numbers of rural branches have reduced considerably during the recent past. The commercial banks rural branches are reduced from 30,579 in 2006 to 21,705 by the year 2011. India has seen the closure on an average of one rural branch of a scheduled commercial bank (SCB) every single working day for the last 15 years. In the same period, bank branches in urban metros increased to a great extent.

5.9 Number of banks achieved net bank credit targets to agriculture sector in India:

The target of 18 per cent of net bank credit for lending to agriculture was introduced in the year 1989 and banks were required to achieve this target by March 1990. However, the banking system as a whole has not reached the level of 18 per cent. In April 2001, private sector banks were asked to achieve the target of 18 per cent of net bank credit for lending to agriculture within a time period of two years. The same time frame was subsequently made applicable to public sector banks in May 2001. This was without prejudice to the allocation under RIDF for not meeting the target for lending under priority sector / agriculture during the intervening period. Accordingly, banks were advised by Reserve Bank of India to step up lending to priority sector (including agriculture) so as to reach the stipulated targets by March 2004.

In the above Table 8, the data shows number of banks achieving the 18 percent credit target by March 2011. The total number of public sector banks not achieving 18 percent target were more as compared to achieving target. Same is the case for private sector banks.

Table- 9 highlights the inability of both public sector banks and private sector banks in reaching the set target of 18 per cent in terms of average net bank credit to agricultural sector for the period from March 2006 to March 2011. Lending share of the public sector banks has been hovering around 15.3 to 16.5 percent from March 2006 to March 2011. At the same time private sector bank lending to agricultural sector has increased form 13.6 per cent to 15.7 per cent. Consequently, private sector banks are increasing their agriculture sector lending quickly when compare to public sector banks.

5.10 Institutional recovery of Agricultural Advances:

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Role of Commercial Banks in Agricultural Credit in India

* Data relate to 2008-09 and 2009-10.Note:1) Data on credit and deposits are taken from the consolidated balance

sheet of SCBs.2) Data on bank branches, new bank branches, branches opened in Tier

3 to Tier 6 centres, and branches opened in unbanked centres are taken from Master Office File, DSIM. Data relate to April- March.

3) Data on branches include branches of Regional Rural Banks in 2010-11.

4) Data on population for the year 2010-11 are taken from Census of India 2011.

5) Data on population per bank branch and population per ATM for the year 2009-10 are repeated from the Report on Trend and Progress of Banking in India 2009-10.

6) Data on population for the year 2009-10 for calculating Indicators 5-8 are derived from the population per bank branch as reported in the Report on Trend and Progress of Banking in India 2009-10.

7) Data on number of deposits and credit accounts are taken from the Basic Statistical Returns 2009-10.

8) Data on number of ATMs, debit cards and credit cards are sourced from the Department of Payment and Settlement System.

From the above Table 5 it is clear that the progress of financial inclusion shows mixed trend during 2009-10 and 2010-11 respectively. There is marginal increase in credit-GDP ratio during the aforesaid period. Same is the case for credit ratio. On the other hand, there is a sharp decline in population per ATM from 19700(2009-10) to 16243(2010-11).

Yet, the extent of financial exclusion is staggering. Out of every 1000 persons, only 99 had a credit account and 600 had a deposit account as at end-March 2010. Innovative and successful Schemes of commercial banks under financial inclusion are;

a. Microfinance programmeb. ‘No-frills’ Accountsc. Farmer's Club Programmed. Swarozgar Credit Card Schemee. Joint Liability Groupsf. Financing Rythu Mitra Groupsg. National Rural Financial Inclusion Plan (NRFIP) h. Liberalization of Business Correspondents Model i. Opening of branches in unbanked rural centers

5.7 Share of agriculture credit from different bank

branches classified by population Groups:

From the above Table 6 it is observed that between 1995 and 2005, the share of agricultural credit supplied by urban and metropolitan bank branches in India increased from 16.3 per cent to 30.7 per cent. The share of agricultural credit supplied by metropolitan branches alone increased from 7.3 per cent in 1995 to 19 per cent in 2005. While there was a moderate decrease in these shares between 2006 and 2008, urban and metropolitan branches continued to supply about one-third of the total agricultural credit in 2008. Concurrently, there was a sharp fall in the share of agricultural credit supplied by rural and semi-urban branches from 83.7 per cent in 1995 to 69.3 per cent in 2005. In 2008, the share of rural and semi-urban branches in total agricultural credit was 66 per cent.

5.8 Commercial bank branches in rural India:At present, institutional agricultural credit is mainly disbursed by commercial banks, cooperative banks and Regional Rural Banks (RRBs) under the multi-agency approach. These banks over a period of time have

Table 5: Progress of Financial Inclusion

No.

1

2009-10 2010-11

53.4 54.6

Source: RBI, Report on Trends and Progress of Banking Industry in India, 2010-11 Report.

Indicator

Credit-GDP

2 73.6 76.5Credit-Deposit

3 14,000 13,466Population per Bank Branch

4 19,700 16,243Population per ATM

5 55.8 61.2Percentage of Population having deposit accounts*

6 9.3 9.9Percentage of Population having credit accounts*

7 15.2 18.8Percentage of Population having debit cards

8 1.53 1.49Percentage of Population having credit cards

9 40.3 55.4Branches opened in Tier 3-6 centres as a per cent of total new bank branches

10 5.6 9.7Branches opened in hitherto unbanked centres as a per cent of total new bank branches

Table 6: Share of agriculture credit from bank branches classified by population groups

Year Share of total agriculture credit (in %) supplied through

1990

Rural plus semi-urban

branches

85.1

Source: calculated from Basic Statistical Returns of Scheduled Commercial banks in India.

Note: due to changes in the classification of rural, semi-urban and metropolitan centers, only the following comparison across years are possible: between 1990 and 1994; between 1995 and 2005; and between 2006 and 2008

Only rural branches

Urban and metropolit

an branches

Only metropolit

an branches

All branches

55.5 14.9 4.0 100.0

1994 83.4 54.6 16.6 5.6 100.0

1995 83.7 52.7 16.3 7.3 100.0

2005 69.3 43.0 30.7 19.0 100.0

2006 62.4 37.1 37.6 23.8 100.0

2008 66.0 38.4 34.0 20.0 100.0

Table 7: Spread of Bank branches across the years

Year

2006

Rural

30,579

Source: RBI, Report on Trends and Progress of Banking in India (Various Years)

Semi-urban

Urban Metropolitan Total

15,556 12,032 11,304 69,471

2007 30,639 16,212 12,792 11,826 71,471

2008 30,898 17,695 15,275 13,831 77,699

2009 31,197 17,979 14,602 13,113 76,891

2010 20,773 17,638 16,007 14,742 69,160

2011 21,705 19,800 16,945 15,680 74,130

Table 8: Number of Banks achieving the 18 per cent Target

As on the last reporting Friday of

2006

Public sector banks

7

Source: RBI, RPCD, various years.

Private sector banks

Not achieving

18% target

Achieving the 18% target

Not achieving

18% target

Achieving the 18% target

21 3 23

2007 8 20 3 23

2008 14 14 6 17

2009 14 13 8 14

2010 12 15 11 22

2011 8 18 11 10

Table 9: Net Bank Credit to agricultural sector

Year

March 2006 18

Source: RBI, RPCD, various years.

Public sector Banks

MandatoryPrivate Sector

Banks

15.3 13.6

March 2007 18 15.6 12.7

March 2008 18 17.5 15.4

March 2009 18 17.6 15.9

March 2010 18 17.1 15.6

March 2011 18 16.5 15.7

(Per cent)

Table 10: Institutional Recovery of Agricultural Advances

Institution

Commercial Banks

2005-06

80.1

Source:RBI, Report on Trends and Progress of Banking in India various years.NA: Not Available

2006-07

2007-08

2008-2009

2009-10

79.7 75.4 75.4 NA

District level Co-Op Banks

74.1 81.5 71 72 75.7

Regional Rural Banks 76.1 78.1 77.4 NA NA

(In per cent)

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Role of Commercial Banks in Agricultural Credit in India

established an impressive branch network: about 82,034 branches of scheduled commercial banks (including RRBs) and over one-lakh outlets of cooperatives in rural and semi-urban areas.

From the above Table 7 it is obvious that the numbers of rural branches have reduced considerably during the recent past. The commercial banks rural branches are reduced from 30,579 in 2006 to 21,705 by the year 2011. India has seen the closure on an average of one rural branch of a scheduled commercial bank (SCB) every single working day for the last 15 years. In the same period, bank branches in urban metros increased to a great extent.

5.9 Number of banks achieved net bank credit targets to agriculture sector in India:

The target of 18 per cent of net bank credit for lending to agriculture was introduced in the year 1989 and banks were required to achieve this target by March 1990. However, the banking system as a whole has not reached the level of 18 per cent. In April 2001, private sector banks were asked to achieve the target of 18 per cent of net bank credit for lending to agriculture within a time period of two years. The same time frame was subsequently made applicable to public sector banks in May 2001. This was without prejudice to the allocation under RIDF for not meeting the target for lending under priority sector / agriculture during the intervening period. Accordingly, banks were advised by Reserve Bank of India to step up lending to priority sector (including agriculture) so as to reach the stipulated targets by March 2004.

In the above Table 8, the data shows number of banks achieving the 18 percent credit target by March 2011. The total number of public sector banks not achieving 18 percent target were more as compared to achieving target. Same is the case for private sector banks.

Table- 9 highlights the inability of both public sector banks and private sector banks in reaching the set target of 18 per cent in terms of average net bank credit to agricultural sector for the period from March 2006 to March 2011. Lending share of the public sector banks has been hovering around 15.3 to 16.5 percent from March 2006 to March 2011. At the same time private sector bank lending to agricultural sector has increased form 13.6 per cent to 15.7 per cent. Consequently, private sector banks are increasing their agriculture sector lending quickly when compare to public sector banks.

5.10 Institutional recovery of Agricultural Advances:

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 201260

Role of Commercial Banks in Agricultural Credit in India

* Data relate to 2008-09 and 2009-10.Note:1) Data on credit and deposits are taken from the consolidated balance

sheet of SCBs.2) Data on bank branches, new bank branches, branches opened in Tier

3 to Tier 6 centres, and branches opened in unbanked centres are taken from Master Office File, DSIM. Data relate to April- March.

3) Data on branches include branches of Regional Rural Banks in 2010-11.

4) Data on population for the year 2010-11 are taken from Census of India 2011.

5) Data on population per bank branch and population per ATM for the year 2009-10 are repeated from the Report on Trend and Progress of Banking in India 2009-10.

6) Data on population for the year 2009-10 for calculating Indicators 5-8 are derived from the population per bank branch as reported in the Report on Trend and Progress of Banking in India 2009-10.

7) Data on number of deposits and credit accounts are taken from the Basic Statistical Returns 2009-10.

8) Data on number of ATMs, debit cards and credit cards are sourced from the Department of Payment and Settlement System.

From the above Table 5 it is clear that the progress of financial inclusion shows mixed trend during 2009-10 and 2010-11 respectively. There is marginal increase in credit-GDP ratio during the aforesaid period. Same is the case for credit ratio. On the other hand, there is a sharp decline in population per ATM from 19700(2009-10) to 16243(2010-11).

Yet, the extent of financial exclusion is staggering. Out of every 1000 persons, only 99 had a credit account and 600 had a deposit account as at end-March 2010. Innovative and successful Schemes of commercial banks under financial inclusion are;

a. Microfinance programmeb. ‘No-frills’ Accountsc. Farmer's Club Programmed. Swarozgar Credit Card Schemee. Joint Liability Groupsf. Financing Rythu Mitra Groupsg. National Rural Financial Inclusion Plan (NRFIP) h. Liberalization of Business Correspondents Model i. Opening of branches in unbanked rural centers

5.7 Share of agriculture credit from different bank

branches classified by population Groups:

From the above Table 6 it is observed that between 1995 and 2005, the share of agricultural credit supplied by urban and metropolitan bank branches in India increased from 16.3 per cent to 30.7 per cent. The share of agricultural credit supplied by metropolitan branches alone increased from 7.3 per cent in 1995 to 19 per cent in 2005. While there was a moderate decrease in these shares between 2006 and 2008, urban and metropolitan branches continued to supply about one-third of the total agricultural credit in 2008. Concurrently, there was a sharp fall in the share of agricultural credit supplied by rural and semi-urban branches from 83.7 per cent in 1995 to 69.3 per cent in 2005. In 2008, the share of rural and semi-urban branches in total agricultural credit was 66 per cent.

5.8 Commercial bank branches in rural India:At present, institutional agricultural credit is mainly disbursed by commercial banks, cooperative banks and Regional Rural Banks (RRBs) under the multi-agency approach. These banks over a period of time have

Table 5: Progress of Financial Inclusion

No.

1

2009-10 2010-11

53.4 54.6

Source: RBI, Report on Trends and Progress of Banking Industry in India, 2010-11 Report.

Indicator

Credit-GDP

2 73.6 76.5Credit-Deposit

3 14,000 13,466Population per Bank Branch

4 19,700 16,243Population per ATM

5 55.8 61.2Percentage of Population having deposit accounts*

6 9.3 9.9Percentage of Population having credit accounts*

7 15.2 18.8Percentage of Population having debit cards

8 1.53 1.49Percentage of Population having credit cards

9 40.3 55.4Branches opened in Tier 3-6 centres as a per cent of total new bank branches

10 5.6 9.7Branches opened in hitherto unbanked centres as a per cent of total new bank branches

Table 6: Share of agriculture credit from bank branches classified by population groups

Year Share of total agriculture credit (in %) supplied through

1990

Rural plus semi-urban

branches

85.1

Source: calculated from Basic Statistical Returns of Scheduled Commercial banks in India.

Note: due to changes in the classification of rural, semi-urban and metropolitan centers, only the following comparison across years are possible: between 1990 and 1994; between 1995 and 2005; and between 2006 and 2008

Only rural branches

Urban and metropolit

an branches

Only metropolit

an branches

All branches

55.5 14.9 4.0 100.0

1994 83.4 54.6 16.6 5.6 100.0

1995 83.7 52.7 16.3 7.3 100.0

2005 69.3 43.0 30.7 19.0 100.0

2006 62.4 37.1 37.6 23.8 100.0

2008 66.0 38.4 34.0 20.0 100.0

Table 7: Spread of Bank branches across the years

Year

2006

Rural

30,579

Source: RBI, Report on Trends and Progress of Banking in India (Various Years)

Semi-urban

Urban Metropolitan Total

15,556 12,032 11,304 69,471

2007 30,639 16,212 12,792 11,826 71,471

2008 30,898 17,695 15,275 13,831 77,699

2009 31,197 17,979 14,602 13,113 76,891

2010 20,773 17,638 16,007 14,742 69,160

2011 21,705 19,800 16,945 15,680 74,130

Table 8: Number of Banks achieving the 18 per cent Target

As on the last reporting Friday of

2006

Public sector banks

7

Source: RBI, RPCD, various years.

Private sector banks

Not achieving

18% target

Achieving the 18% target

Not achieving

18% target

Achieving the 18% target

21 3 23

2007 8 20 3 23

2008 14 14 6 17

2009 14 13 8 14

2010 12 15 11 22

2011 8 18 11 10

Table 9: Net Bank Credit to agricultural sector

Year

March 2006 18

Source: RBI, RPCD, various years.

Public sector Banks

MandatoryPrivate Sector

Banks

15.3 13.6

March 2007 18 15.6 12.7

March 2008 18 17.5 15.4

March 2009 18 17.6 15.9

March 2010 18 17.1 15.6

March 2011 18 16.5 15.7

(Per cent)

Table 10: Institutional Recovery of Agricultural Advances

Institution

Commercial Banks

2005-06

80.1

Source:RBI, Report on Trends and Progress of Banking in India various years.NA: Not Available

2006-07

2007-08

2008-2009

2009-10

79.7 75.4 75.4 NA

District level Co-Op Banks

74.1 81.5 71 72 75.7

Regional Rural Banks 76.1 78.1 77.4 NA NA

(In per cent)

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 63

Role of Commercial Banks in Agricultural Credit in India

processes of credit delivery. Banks need to develop an array of financial products and services that are adapted to the needs of the majority of rural people at affordable prices.

References:

1. Dr T. R. Gurumoorthy (2004). “Institutional Credit to Agricultural”. Facts For you, May 2004.

2. Government of India, Economic Survey 2010-2011.

3. Mr. K.P.Agrawal, Mr. V.Puhazhendhi, Mr.K.J.S.Satyasai (1997), “Gearing Rural Credit for the twenty-first Century “Economic and Political Weekly, October 18, 1997.

4. NABARD “Annual Report”, various years, National Bank for Agriculture and Rural Development, www.nabard.org.in.

5. Navin Chandra Joshi. “Role of Commercial Banks in Rural credit and Development”. Kurukshetra, Vol.46, No.9, December 1988, pp. 21-22, New Delhi.

6. M. Nagendra “Financial inclusion grains urgency” The Hindu Survey of Indian industry 2011, the Hindu, 2011.

7. Pallavi Chavan (2010), “How ‘rural' is India's agricultural credit?” The Hindu, 13 August 2010.

8. Planning Commission, “Report of the Working Group on Crop Husbandry, Demand & Supply Projections and Agricultural Inputs for the Tenth Five Year Plan”. Government of India, September, 2001.

9. P.N. Vasudevan (2011), “Heady Past, unsteady future” The Hindu Survey of Indian industry 2011, The Hindu, 2011.

10. RBI. “Report on Trends and Progress of Banking Industry in India,” various years, Reserve Bank of India, www.rbi.org.in.

11. RBI, “Handbook of statistics on Indian Economy”, Reserve Bank of India, www.rbi.org.in.

12. RBI, “Branch Banking Statistics”, various years, Reserve Bank of India, www.rbi.org.in.

13. RBI, “Annual Reports”, various years, Reserve Bank of India, www.rbi.org.in.

14. RBI. “Report of the Advisory Committee on Flow of Credit to Agriculture and Related Activities from the Banking System”. June 2004.

15. RBI (1978), “Report of the Review Committee on Regional Rural Banks”. Reserve Bank of India, 1978.

16. Rakesh Mohan (2006), “Agricultural credit in India “Economic and Political Weekly, March 18, 2006.

17. Ramesh Golait (2007), “Current Issues in Agriculture Credit in India: An Assessment” Reserve Bank of India Occasional Papers, Vol. 28, No. 1, Summer 2007, page No: 89-99.

18. R.RadhaKrishna (2007). “Report of Expert Group on Agricultural Indebtedness”. Ministry of Finance, Government of India, July 2007.

19. Saikat Neogi (2010), “Farmers’ share of deposits close to salaried class” The Financial Express, 5th November, 2010.

20. Somnath Chattterjee. “The developmental challenge in rural India”. The Hindu, April 4, 2007.

21. Sukanya Bose, “Regional Rural Banks: The Past and the Present Debate”. www.macroscan.com/fet/jul05/ pdf/RRB_Debate.pdf.

22. Subah Singh Yadav, “Emerging Avenues in Rural Banking”. Kurukshetra, Vol.53, January 2005, pp. 20-23.

23. Vyas Committee (2004), “Advisory Committee on Flow of Credit to Agriculture and Related Activities from the Banking System”. Reserve Bank of India, 2004.

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 201262

Role of Commercial Banks in Agricultural Credit in India

At the aggregate level, the recovery position of overdues with respect to agricultural advances, as evaluated by the percentage of overdues to demand was almost same during review period. The above Table 10 shows the recovery performance of Commercial Banks (CBs) has been quite impressive in comparison to other rural lending institutions. The recoveries in the commercial banking system were around 80.1 (2005-06) to 75.4 per cent (2008-09). The position of RRBs has also improved in same period. The recovery position in the case of cooperatives, however, is not very impressive. The percentage of recovery increased from 71 per cent (2007-08) to 75.7 per cent (2009-10).

5.11 Priority Sector Shortfall - Contribution to RIDF:The domestic scheduled commercial banks credit flow to agriculture has been falling short of the priority sector target of 18 per cent for agriculture. As mentioned earlier Commercial banks which fail to meet priority sector lending requirements to agriculture are required to contribute a part of the shortfall to RIDF which was established by NABARD in 1995.

According to the data presented in the above Table 11 only a part of this shortfall (default) has been allocated to RIDF by banks. For instance, from the total outstanding credit in 2005-06, the shortfall was Rs. 36,628 crore whereas the amount allocated to RIDF was Rs.14, 000 crore only. There is a need to allocate the additional funds for investment in agriculture either directly by NABARD or through the issue of Rural Development Bonds (RDBs) by the Government of India.

5.12 Share of Farmers’ Deposits in Commercial Banks:There are hard numbers behind the enthusiasm of the banks and micro-finance institutions in tapping rural India. Farmers now account for almost 11% of the total deposits with banks, savings and current accounts included. The data, released by Reserve Bank of India show the farming community has significant linkage with the banking sector. The numbers, almost Rs2 lakh core, show there is a strong need for the banking sector to develop varied product that appeal to farmers. As of now, there are no deposit products with banks which are meant for farmers. Almost all the deposit schemes, run by the scheduled commercial banks are aimed at the salary and wage earners. This picture is ripe for change. Deposits from farmers now rank closely behind that of salary and wage earners, as the accompanying Table 12 shows.

The above Table 12 indicates that farmer contribution is decreasing from 7 percent (2006) to 5.3 percent (2008). On the other hand, total household contribution remains constant during this period.

6. Conclusion

During the review period it was observed that public sector banks achieved their priority sector-lending target of 40 per cent of aggregate bank advances effectively. Their credit flow to priority sector is around.40.3 per cent during the review period. But where as 18% target fixed for the agricultural sector with in the Adjusted Net Bank Credit (ANBC) lending norms, have not achieved by both public and private sector banks effectively. In this regard private sector banks performance was very dismal in comparison to public sector banks. At the same time the commercial banks rural branches are reduced from 30,579 in 2006 to 21,705 by the year 2011. The study also reveals that commercial banks are not offering any schemes for farmer’s deposits As there are several constraints in agricultural lending both on supply side and demand side there is a need for renewed thinking on the methods and

Table 11: Measured Gap between Default and RIDF Allocation for all Domestic Scheduled

Commercial Banks

Number of banks defaulting in respect of achievement of agricultural lending target

2003-04

45

Note: * not yet allocated. ** Rs. 4,000 crores under the separate window for rural roads component of Bharat Nirman Programme under RIDF-XII for 2006-07 and RIDF XIII for 2007-08.Source: 1. RBI (in a special communication to the Expert Group) and 2. Ministry of Finance, Task Force on Revival of Rural Cooperative Credit Institutions, 2005 and Nabard.

2004-05 2005-06 2006-07*

43 44 NA

Amount of agricultural credit defaulted

4,585.65 31,759.11 36,627.81 NA

Amount allocated to banks for RIDF under respective tranches as per corpus announced by the Government

8,000 for RIDF-X (for 2004-05)

8,000 for RIDF-XI (for 2005-06)

14,000** 16,000 **

(Rs. Crore)

Difference between Amount defaulted and allocations

16586 23759 Rs..22628 NA

Table 12: Ownership of deposits with scheduled commercial banks

Farmers 152295 (7.0)

Figures in brackets indicate percentages to total Source: RBI

20072006 2008

172442(6.4) 177190 (5.3)

Wage & Salary earners 164166 (7.6) 178033 (6.6) 218195 (6.6)

Trusts, associations, clubs etc

45208 (2.1) 71663 (2.7) 80977 (2.4)

Education institutions 19583 (0.9) 26112 (1.0) 28595 (0.9)

Religious institutions 7004 (0.3) 9502 (0.4) 8474 (0.3)

Total household sector 1264373 (58.5) 1549716 (57.4) 1928017 (58.1)

(Rs. Crore)

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 2012 63

Role of Commercial Banks in Agricultural Credit in India

processes of credit delivery. Banks need to develop an array of financial products and services that are adapted to the needs of the majority of rural people at affordable prices.

References:

1. Dr T. R. Gurumoorthy (2004). “Institutional Credit to Agricultural”. Facts For you, May 2004.

2. Government of India, Economic Survey 2010-2011.

3. Mr. K.P.Agrawal, Mr. V.Puhazhendhi, Mr.K.J.S.Satyasai (1997), “Gearing Rural Credit for the twenty-first Century “Economic and Political Weekly, October 18, 1997.

4. NABARD “Annual Report”, various years, National Bank for Agriculture and Rural Development, www.nabard.org.in.

5. Navin Chandra Joshi. “Role of Commercial Banks in Rural credit and Development”. Kurukshetra, Vol.46, No.9, December 1988, pp. 21-22, New Delhi.

6. M. Nagendra “Financial inclusion grains urgency” The Hindu Survey of Indian industry 2011, the Hindu, 2011.

7. Pallavi Chavan (2010), “How ‘rural' is India's agricultural credit?” The Hindu, 13 August 2010.

8. Planning Commission, “Report of the Working Group on Crop Husbandry, Demand & Supply Projections and Agricultural Inputs for the Tenth Five Year Plan”. Government of India, September, 2001.

9. P.N. Vasudevan (2011), “Heady Past, unsteady future” The Hindu Survey of Indian industry 2011, The Hindu, 2011.

10. RBI. “Report on Trends and Progress of Banking Industry in India,” various years, Reserve Bank of India, www.rbi.org.in.

11. RBI, “Handbook of statistics on Indian Economy”, Reserve Bank of India, www.rbi.org.in.

12. RBI, “Branch Banking Statistics”, various years, Reserve Bank of India, www.rbi.org.in.

13. RBI, “Annual Reports”, various years, Reserve Bank of India, www.rbi.org.in.

14. RBI. “Report of the Advisory Committee on Flow of Credit to Agriculture and Related Activities from the Banking System”. June 2004.

15. RBI (1978), “Report of the Review Committee on Regional Rural Banks”. Reserve Bank of India, 1978.

16. Rakesh Mohan (2006), “Agricultural credit in India “Economic and Political Weekly, March 18, 2006.

17. Ramesh Golait (2007), “Current Issues in Agriculture Credit in India: An Assessment” Reserve Bank of India Occasional Papers, Vol. 28, No. 1, Summer 2007, page No: 89-99.

18. R.RadhaKrishna (2007). “Report of Expert Group on Agricultural Indebtedness”. Ministry of Finance, Government of India, July 2007.

19. Saikat Neogi (2010), “Farmers’ share of deposits close to salaried class” The Financial Express, 5th November, 2010.

20. Somnath Chattterjee. “The developmental challenge in rural India”. The Hindu, April 4, 2007.

21. Sukanya Bose, “Regional Rural Banks: The Past and the Present Debate”. www.macroscan.com/fet/jul05/ pdf/RRB_Debate.pdf.

22. Subah Singh Yadav, “Emerging Avenues in Rural Banking”. Kurukshetra, Vol.53, January 2005, pp. 20-23.

23. Vyas Committee (2004), “Advisory Committee on Flow of Credit to Agriculture and Related Activities from the Banking System”. Reserve Bank of India, 2004.

"Pragyaan: Journal of Management" Volume 10 : Issue 1, June 201262

Role of Commercial Banks in Agricultural Credit in India

At the aggregate level, the recovery position of overdues with respect to agricultural advances, as evaluated by the percentage of overdues to demand was almost same during review period. The above Table 10 shows the recovery performance of Commercial Banks (CBs) has been quite impressive in comparison to other rural lending institutions. The recoveries in the commercial banking system were around 80.1 (2005-06) to 75.4 per cent (2008-09). The position of RRBs has also improved in same period. The recovery position in the case of cooperatives, however, is not very impressive. The percentage of recovery increased from 71 per cent (2007-08) to 75.7 per cent (2009-10).

5.11 Priority Sector Shortfall - Contribution to RIDF:The domestic scheduled commercial banks credit flow to agriculture has been falling short of the priority sector target of 18 per cent for agriculture. As mentioned earlier Commercial banks which fail to meet priority sector lending requirements to agriculture are required to contribute a part of the shortfall to RIDF which was established by NABARD in 1995.

According to the data presented in the above Table 11 only a part of this shortfall (default) has been allocated to RIDF by banks. For instance, from the total outstanding credit in 2005-06, the shortfall was Rs. 36,628 crore whereas the amount allocated to RIDF was Rs.14, 000 crore only. There is a need to allocate the additional funds for investment in agriculture either directly by NABARD or through the issue of Rural Development Bonds (RDBs) by the Government of India.

5.12 Share of Farmers’ Deposits in Commercial Banks:There are hard numbers behind the enthusiasm of the banks and micro-finance institutions in tapping rural India. Farmers now account for almost 11% of the total deposits with banks, savings and current accounts included. The data, released by Reserve Bank of India show the farming community has significant linkage with the banking sector. The numbers, almost Rs2 lakh core, show there is a strong need for the banking sector to develop varied product that appeal to farmers. As of now, there are no deposit products with banks which are meant for farmers. Almost all the deposit schemes, run by the scheduled commercial banks are aimed at the salary and wage earners. This picture is ripe for change. Deposits from farmers now rank closely behind that of salary and wage earners, as the accompanying Table 12 shows.

The above Table 12 indicates that farmer contribution is decreasing from 7 percent (2006) to 5.3 percent (2008). On the other hand, total household contribution remains constant during this period.

6. Conclusion

During the review period it was observed that public sector banks achieved their priority sector-lending target of 40 per cent of aggregate bank advances effectively. Their credit flow to priority sector is around.40.3 per cent during the review period. But where as 18% target fixed for the agricultural sector with in the Adjusted Net Bank Credit (ANBC) lending norms, have not achieved by both public and private sector banks effectively. In this regard private sector banks performance was very dismal in comparison to public sector banks. At the same time the commercial banks rural branches are reduced from 30,579 in 2006 to 21,705 by the year 2011. The study also reveals that commercial banks are not offering any schemes for farmer’s deposits As there are several constraints in agricultural lending both on supply side and demand side there is a need for renewed thinking on the methods and

Table 11: Measured Gap between Default and RIDF Allocation for all Domestic Scheduled

Commercial Banks

Number of banks defaulting in respect of achievement of agricultural lending target

2003-04

45

Note: * not yet allocated. ** Rs. 4,000 crores under the separate window for rural roads component of Bharat Nirman Programme under RIDF-XII for 2006-07 and RIDF XIII for 2007-08.Source: 1. RBI (in a special communication to the Expert Group) and 2. Ministry of Finance, Task Force on Revival of Rural Cooperative Credit Institutions, 2005 and Nabard.

2004-05 2005-06 2006-07*

43 44 NA

Amount of agricultural credit defaulted

4,585.65 31,759.11 36,627.81 NA

Amount allocated to banks for RIDF under respective tranches as per corpus announced by the Government

8,000 for RIDF-X (for 2004-05)

8,000 for RIDF-XI (for 2005-06)

14,000** 16,000 **

(Rs. Crore)

Difference between Amount defaulted and allocations

16586 23759 Rs..22628 NA

Table 12: Ownership of deposits with scheduled commercial banks

Farmers 152295 (7.0)

Figures in brackets indicate percentages to total Source: RBI

20072006 2008

172442(6.4) 177190 (5.3)

Wage & Salary earners 164166 (7.6) 178033 (6.6) 218195 (6.6)

Trusts, associations, clubs etc

45208 (2.1) 71663 (2.7) 80977 (2.4)

Education institutions 19583 (0.9) 26112 (1.0) 28595 (0.9)

Religious institutions 7004 (0.3) 9502 (0.4) 8474 (0.3)

Total household sector 1264373 (58.5) 1549716 (57.4) 1928017 (58.1)

(Rs. Crore)

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courses, namely, MBA and MCA are duly approved by AICTE and

Ministry of HRD, Government of India.

The Institute has also taken up activities to facilitate respectable

placement for our students. Our Training & Placement Cell has

been working with the industry to cater to its current needs

effectively and the final placement scenario has been

phenomenal. Many organizations are showing strong desires to

have our students on board as their employees. For all round

development of our students, many extra curricular activities are

arranged. This is proving to be useful in translating efforts of our

students into positive results.

The Institute brings out four Journals, one each in the disciplines

of IT, Management, Law and Mass Communication, in an effort

to fulfill our objective of facilitating and promoting quality

research work in India.

The recent call for knowledge capital has increased the demand

for a quality education specifically in professional courses like IT,

Management, Law and Mass Communication.

With a focus on catering to the demands of modern industry,

Institute of Management Studies, Dehradun started its venture in

the year 1996, under the aegis of IMS Society, which is registered

body under The Societies Registration Act 1860.

The potential employers of professional students today are

looking for visionaries with skills to create future. IMS Dehradun

has accordingly taken a stride to produce world class

professionals. It is totally committed to provide high quality

education, enhance the intrinsic abilities, and promote

managerial and technological skills of the students.

• Provide sound academic environment to students for

complete learning.

• Provide state of-art-technical infrastructure.

• Facilitate students and staff to realize their potential.

• Promote skills of the students for their all round

development.