View of A STUDY ON FINANCIAL COMMUNICATION METHODS: TRADITIONAL VS. ONLINE

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Vol.04,Special Issue 08, (EMDMSCBW-2019) December 2019, Available Online: www.ajeee.co.in/index.php/AJEEE

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A STUDY ON FINANCIAL COMMUNICATION METHODS: TRADITIONAL VS. ONLINE

1Ms. Vinita Ramchandani, ²Dr. Anindita S. Chatterjee

1Asst. Professor, Shri Vaishnav Institute of Management, Indore

2Asst. Professor, Institute of Management Studies, DAVV, Indore

Abstract:- Increased use of technology among general public has brought various changes in the way people access information. There has been a massive growth in number of internet users worldwide. This has changed the methods of communication adopted by the organizations. Technology has made it easier for organizations to communicate better, faster, timely and in a more cost effective manner. The present study focuses on analyzing the views of investors on traditional methods as compared to online methods of financial communication used by companies.

Keywords: Financial Communication, Stakeholders, Traditional methods, online methods, Investors perception.

1. INTRODUCTION

A series of action used to interact with the potential and present investors (Heldenbergh and Scoubeau, 2005) in a dynamic environment that is full of risk and uncertainties (Robbin, 1987) is termed as financial communication. As a combination of interrelated and dynamic components including organization, message and receiver; financial communication is viewed as a complex process. Its bidirectional nature and availability of multi channel requires special attention from top managers of the organization (Ramassa, 2016). Working in a dynamic environment is like running business of managing risk (Jorion, 2007). Trustworthy relationships need to be build with stakeholders to improve their risk taking capability (Mayer et al., 1995; Sheppard and Sherman, 1998) and this requires transparent, consistent, reliable communication policies (Hon and Grunig, 1999;

Metlay, 1999; Rawlins, 2009; Vidotto et al., 2008).

Usage of technology, inventions such as smart phones, internet and globalization has made in inevitable for an individual to communicate effectively and efficiently (Waldeck et. al., 2012). Establishing a favourable reputation of an organization requires effective coordination of different means of communication (Cornelissen, 2004). Various sources of information provide different types of messages to people who understand and interpret it in different manner. This has increased the complexity of communicating effectively and efficiently (Du-Babcock, 2006). As far as any communication procedure is concerned company, message and receiver subsystem are important parts of the communication system and are interdependent components (Ramassa, 2016). Receiving messages from various sources leads to multiple images being formed in mind of stakeholders (Cornelissen, 2000). Bidirectional and multichannel has added to the difficulties of effective financial communication (Ramassa, 2016). In such a scenario proper planning and strategic implementation is required. Importantly, an organization needs to be transparent and fair information provider for its partners and stakeholders (Dumitru et. al., 2016).

Better understanding on part of stakeholders is possible only if relevant and credible information is given by an organization (Chen & Steiner, 2000; Chung & Jo, 1996). Variety of messages are communicated to different stakeholders using various different communication mediums like advertising, sponsorships, direct marketing (Balmer and Greyser, 2003). Message to be communicated should be clear in language and its interpretation (Sinha, 2012). Emails, webcasts, webpage are all result of increased usage of technology by public. More variety leads to more analysis on part of organizations before choosing any medium to communicate (Stuart et. al., 2007; Quirke, 2002). New methods need to be adopted by corporate to excel in their respective fields and achieve corporate success (Goodman, 2006).

2. REVIEW OF LITERATURE

An integrated effort of communication is inevitable in scenario of inconsistencies to obtain the desired result (van Riel and Fombrun, 2007; Seiffert et. al., 2011). Integration of symbols, messages, procedures and behaviors is required for consistent, clear and continuous communication (Kerr et. al., 2008; Christensen et. al., 2008). Capital market outcomes are important for any organization and it gets affected according to the method of

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communication used by any organization. Huge amount of data availability, technology usage, and awareness about investment options has led to communication becoming complex task (Miller and Skinner, 2015). Although, the same technology has made it easier and convenient to communicate to various individuals around the world at same time (Heldenbergh and Scoubeau, 2005).

Acceptance of messages on part of stakeholders is easy if messages communicated are understandable and communicates meaningful information (Argenti, 2007). Moreover, quality information helps in maintaining trustworthy relationships with stakeholders (Thomas et. al., 2009). Better understanding of an organization can be obtained by stakeholders only if relevant and credible information is being circulated by organization in a proper and efficient manner on regular basis (Chen and Steiner, 2000; Chung and Jo, 1996). Managers one of the functions is to provide accurate and timely information to the stakeholders to establish a trustworthy relationship with them (Miller and Skinner, 2015).

Trustworthy and strong relationship of an organization with its stakeholders helps in making accurate and timely decisions about message type, feedback mechanism, channel to be used, time of disclosing information and other such related issues (Sinha and Bhatia, 2016). To deliver suitable messages, a feedback mechanism is required (Argenti, 2007).

3. METHODS OF COMMUNICATION

Diversified interest of stakeholders and increase in methods of communication has made financial communication complex (Observatoire Communication Financierc, 2012).

Corporate success depends on how effectively and timely an organization can adopt new methods and technology of communication (Goodman, 2006). Production, dissemination and processing of the information and the ways used are important in present times (Miller and Skinner, 2015). Financial reporting choices of an organization are associated with capital market benefits (Cohen, 2003). Further, Medium chosen depends upon factors such as accuracy, reach and effectiveness of the medium used (Sinha, 2012).

Communication methods used includes annual report, meetings, conference calls, speeches, information on social networking sites (www.icaiknowledgegateway.org). Annual reports, general assembly, financial advertising and internet, road shows, letters to shareholders are some other ways of communicating information (Heldenbergh et. al., 2006). Conducting meetings, emails, sending messages, conference calls, newsletter, and posters are all ways of communication (Observatoire Communication Financierc, 2012).

Interim, prospectus, press releases, annual reports and websites are other few ways of communication (Mangala and Isha, 2015).

Traditional methods of communication include print media like reports, brochures and are targeted for wide audience. Face-to-face communication is helpful in strengthening the relationship of stakeholders and organization (Yong, Low and Chew, 2013). Huge number of active users and viral feature of social media has made online communication important (Baird and Parasnis, 2011). Development of internet has made it possible for organizations to communicate with lot of people of different locations at same time and at reasonable price (Heldenbergh and Scoubeau, 2005). Online methods includes emails, websites, online forums, social networking and is a method preferred where personal touch to messages is required. It is helpful in communicating information globally at the same time and equal accessibility to all the stakeholders (Yong, Low and Chew, 2013). Integrated communication strategies and its usage of social platforms have helped organizations in building e-reputation (Dutot et. al., 2016). Online communication has provided customers a platform where they can raise queries and clarify doubts (Birim, 2016).

According to a survey conducted in New Delhi major five categories of mediums used are public media, personalized media, social networks, virtual mediums and other.

Newspapers and journals form part of public media while gifts, films and sponsorships are part of personalized media. Websites, internet are part of virtual medium (Sinha and Bhatia, 2016). Written or printed information communication channel is used when organization is communicating in monologue format. When information requires dialogue, face-to-face communication is preferred (Daft and Lengel, 1986). Individual engagement is seen to be better through virtual media because of their interactivity as compared to traditional media. Also, messages depends upon the information that needs to be communicated like core values are communicated using value based message, concern for

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environment are communicated through different messages, image messages are sent during situation of uncertainty (Sinha and Bhatia, 2016).

4. ATTRIBUTES OF INFORMATION

Improvement in accounting standards helps in achieving efficiency of organizational operations (Asuquo, 2013). Qualitative characteristics of reports includes adherence to accounting standards and corporate governance policies. Certain guidelines for disclosures were drafted to help stakeholders make proper decisions. Meaningful assessments about organizations performance can be made. Accuracy, reliability, transparency and quality information needs to be provided in the market (Omoolorun and Abilogun, 2017).

Major objectives as listed by FASB in USA of financial reporting include usefulness, resource usage, financial performance, earnings, cash statements and interest of owners (www.icaiknowledgegateway.org). Improving reputation and image in eyes of stakeholders is an important objective served by financial information disclosure (Heldenbergh, Scoubeau, Arnone and Croquet, 2006). To nurture the bond between stakeholders and organizations, communicating financial statements in effective and timely manner is necessary (Wang, 2013). Transparency helps in achieving this goal (Salvioni, 2002). Source and accuracy of data are important parameters while taking investment decision. Value and importance of information changes with time, making availability of information on time an important factor. Company’s financial statements and notes serve as inputs for investors (Manuilova, 2016).

Various principles govern the successful flow of information to the stakeholders (Observatoire Communication Financierc, 2012). Characteristics such as understand ability, relevance, reliability, comparability, faithful representation, verifiability and timeliness are considered important parameters of financial information (www.icaiknowledgegateway.org, IASB, 2008). Information presented should be neutral and free from bias (IASB, 2008). Organizations which adhere to corporate governance policies have more probability of presenting faithful information (Sloan, 2001; Holland, 1999).

Representing information in a way that its reader can comprehend its meaning is important. Clear and concise presentation helps in understand ability (IASB, 2008). Usage of tables and graphs in financial statements helps in ensuring conciseness of the information (Jonas & Blanchet, 2000).

Reducing information asymmetry is a goal that can be achieved through accurate and reliable information. International accounting standards and national legislation helps in achieving this goal (Rosenkranz and Pollach, 2016). Identifying similarities and differences between different reports of same organization or different organizations is a quality that helps in comparing information thereby helping investor in decision making process (IASB, 2008). Disclosure of authentic information in appropriate and timely manner helps in strengthening the bond between stakeholders and organization (Mangala and Isha, 2015).

4.1 Rationale

Changes in technology and its widespread usage by public have led to emergence of various communication channels. Different channels have its pros and cons. Financial communication comes with its own difficulties about what information needs to be communicated to the investors. Further, multiple sources and their relative importance has made it difficult for an organization to decide which information source should be used.

Despite of large number of studies available, the review of literature done did not indicate any study regarding which communication channel is more preferred by an investor. This paper is an attempt to compare the traditional and online methods of communication used by organization which will help in knowing the most preferred method of communication by investors. Using the most preferred method of communication will lead to the effectiveness of the communication.

4.2 Objective

To compare the traditional methods of financial communication with the online methods used by an organization.

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4 5. RESEARCH METHODOLOGY

Nature of the study: The study is empirical in nature.

5.1 Sample

For the present study primary and secondary data was collected. Secondary data was collected through various newspaper, journals and official websites. For collection of primary data a questionnaire was designed. The questionnaire was designed to collect demographic information of the respondent and asked him to rate traditional and online methods of financial communication on the basis of following 8 factors: accessibility, regularity, reliability, understand ability, availability, user-friendliness of technology used, timeliness and clarity. Responses were recorded on scale of 1to 5 where 1 denoted lowest rating and 5 denoted highest rating (Appendix A).

5.2 Data Collection

Responses were collected using convenient sampling technique. The questionnaire was mailed to 120 respondents in Indore city who were investing from past 2 years or more. 90 of the respondents replied to the questionnaire, out of which 7 were not complete and thus could not be included in the study. Total 83 responses were used to analyze the results.

5.3 Data Analysis

To test the reliability of the questionnaire developed, Cronbach Alpha was applied. Further data was analyzed by applying T-test to know the significant difference between the traditional and online methods of financial communication. F-test was also applied on some of the demographic factors. The Statistical Package for Social Sciences version 20.0 was used to conduct data analysis.

5.4 Sample Characteristics

From the total of 83 respondents, 49 were female and rests 34 were male. Majority of the participants were of the age group 20-50 years while 4 of the participant were above 50 years. The participants had different qualifications. 48 out of 83 respondents were postgraduate, 21 were doctorate, and 11 were graduate while 3 were undergraduate. The questionnaire also recorded the family investment of the group. 37 respondents invested 2 to 6 lacs annually, 27 invested below 2 lacs and 19 invested above 6 lacs and above. The purpose of investment of 54 respondents was tax saving and long term wealth creation both while 24 individuals marked long term wealth creation as their purpose of investment and 4 considered tax saving as their purpose.

5.5 Hypothesis Formulation

The hypothesis formulation and analysis is divided into two parts. The first part relates to the demographic information collected and its analysis while second part includes the analysis of traditional and online methods of communication based on various factors.

Part 1: Demographic information collected included gender, age group, educational qualification, family investment level, purpose of investment. T-test was applied on gender while on all remaining factors F-test was applied.

1. H01: There is no significant difference in traditional and online methods on the basis of gender of respondents.

2. H02: There is no significant difference in traditional and online methods on the basis of age groups of respondents.

3. H03: There is no significant difference in traditional and online methods on the basis of educational qualifications of the respondents.

4. H04: There is no significant difference in traditional and online methods on the basis of family investment level.

5. H05: There is no significant difference in traditional and online methods on the basis of purpose of investment.

Part 2: The traditional and online methods of communication were compared on various factors and T-test was applied to analyze the data.

1. H06: There is no significant difference in traditional and online methods on the basis of accessibility.

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2. H07: There is no significant difference in traditional and online methods on the basis of regularity.

3. H08: There is no significant difference in traditional and online methods on the basis of reliability.

4. H09: There is no significant difference in traditional and online methods on the basis of understandability.

5. H10: There is no significant difference in traditional and online methods on the basis of availability.

6. H11: There is no significant difference in traditional and online methods on the basis of User-friendliness of technology.

7. H12: There is no significant difference in traditional and online methods on the basis of timeliness.

8. H13: There is no significant difference in traditional and online methods on the basis of clarity.

6. DISCUSSIONS AND SUGGESTIONS Cronbach Alpha

1. H01: There is no significant difference in traditional and online methods on the basis of gender of respondents.

CASE PROCESSING SUMMARY N Percentage

CASES Valid 83 100%

Excluded 0 0

Total 83 100%

RELIABILITY STATISTICS

Cronbach’s Alpha Cronbach’s Alpha based

on Standardized items Number of Items

0.948 0.949 16

For all the factors of traditional and online methods, values were more than 0.05 thus null hypothesis is accepted (Refer Appendix B Table 1).

2. H02: There is no significant difference in traditional and online methods on the basis of age groups of respondents.

Variable F Sig.

User friendliness of online methods 3.278 0.043

As in above table, Sig. value is 0.043 which is less than 0.05, thus null hypothesis is rejected. Hence there is significant difference in traditional and online methods on the basis of age group of respondents. (Refer Appendix B Table 2).

3. H03: There is no significant difference in traditional and online methods on the basis of educational qualifications of the respondents.

Variable F Sig.

Regularity of traditional methods 3.816 0.013 Understandability of traditional methods 3.33 0.024

As in above table, Sig. value is 0.013 and 0.024 which is less than 0.05, thus null hypothesis is rejected. Hence there is significant difference in traditional and online methods on the basis of educational qualifications of the respondents. (Refer Appendix B Table 3).

4. H04: There is no significant difference in traditional and online methods on the basis of family investment level.

For all the factors of traditional and online methods, values were more than 0.05 thus null hypothesis is accepted. (Refer Appendix B Table 4).

5. H05: There is no significant difference in traditional and online methods on the basis of purpose of investment.

For all the factors of traditional and online methods, values were more than 0.05 thus null hypothesis is accepted. (Refer Appendix B Table 5).

6. H06: There is no significant difference in traditional and online methods on the basis of accessibility.

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Variable T-test for equality of means D. F. Sig. (2-tailed)

Accessibility -2.857 164 0.005

As in above table, Sig. value is 0.005 which is less than 0.05, thus null hypothesis is rejected. Hence there is significant difference in traditional and online methods on the basis of accessibility.

7. H07: There is no significant difference in traditional and online methods on the basis of regularity.

Regularity -1.481 164 0.141

As in above table, Sig. value is 0.141 which is more than 0.05, thus null hypothesis is accepted.

8. H08: There is no significant difference in traditional and online methods on the basis of reliability.

Reliability 0.989 164 0.324

9. H09: There is no significant difference in traditional and online methods on the basis of understandability.

Variable T-test for equality of means D. F. Sig. (2-tailed)

Understandability -1.458 164 0.147

10. H10: There is no significant difference in traditional and online methods on the basis of availability.

Availability -1.33 164 0.185

11. H11: There is no significant difference in traditional and online methods on the basis of user-friendliness of technology.

Variable T-test for equality of means D. F. Sig. (2-tailed)

User-friendliness -1.643 164 0.102

12. H12: There is no significant difference in traditional and online methods on the basis of timeliness.

Variable T-test for equality of means D. F. Sig. (2-tailed)

Timeliness -2.239 164 0.026

As in above table, Sig. value is 0.026 which is less than 0.05, thus null hypothesis is rejected. There is significant difference in traditional and online methods on the basis of Timeliness.

13. H13: There is no significant difference in traditional and online methods on the basis of clarity.

Variable T-test for equality of means D. F. Sig. (2-tailed)

Clarity -1.121 164 0.264

7. CONCLUSION

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According to the analysis applied on the demographic information, no significant difference was found in traditional and online methods on the basis of gender, family investment level and purpose of investment. While age group of respondents were found to influence their opinion about user friendliness of online methods. Educational qualification of the respondents showed significant difference on regularity and reliability of traditional methods.

Further, the analysis revealed that the there is significant difference in traditional methods of communication and online method of communication on the basis of accessibility of information. Respondents are of the view that there also exists significant difference in traditional methods of communication and online methods of communication on the basis of timeliness of the information. For all other factors which includes regularity of the information provided by the organizations, reliability of the information, understandability of the facts and figures and related information, availability of information, user-friendliness of the technology adopted by the organizations to communicate and clarity of the information provided through various sources, there exists no significant difference between traditional methods of communication like annual reports, annual general meetings, conference calls, radio, television, newspapers, press releases, letters to stakeholders etc. and online methods like social networking sites, websites, emails, mobile phones etc.

The study helped us to get a better picture of the traditional and online methods variation and their preference among respondents. 6 out of 8 factors have shown that respondents do not find any major difference in traditional and online methods of communication. Company can use both the types of communication equivalently for targeting the markets. The study also reveals that investors consider both traditional methods of communication and online methods of communication regular and reliable.

Both the methods are available to the investors to know the information of an organization.

The methods of communication present the information in clear manner for investors to interpret.

User friendliness of technology was seen to be having a difference on age group of respondents. This helps us to know that from technological point of view, online methods are easily adaptable for younger age group. Further, it was also analyzed that people with higher educational qualifications are able to easily understand the information presented through traditional methods but people with less qualifications find it difficult to understand the information. But since this difference is seen in only traditional methods communication, an organization may use online methods of communication with easy and clear language to communicate with such community.

Overall it can be concluded that an organization needs to use an integrated approach of communication with the financial community. Traditional and online methods are equally contributing in presenting the company in front of the investors and helping an organization form a good image and reputation in the eyes of the stakeholders. Differences of age group and educational qualification affect the perception of the individuals and thus an organization should try to communicate in a manner to satisfy and meet the requirements of different stakeholders.

7.1 Limitations and Future Scope

Due to constraint of available resources, the present study was limited to the respondents of Indore city only. The results of the study may vary according to the area of research. The study if carried on a larger group (respondents) may reveal different results. Future research may also consider the investment options available like mutual funds, government schemes and bonds, bank deposits, shares, debentures etc. and the respondents’

perception about communication methods used for these different options differently. Other demographic variables like marital status, occupation, annual savings, sources of funds may also be used to categorize the type of investors and then study the communication method preferred by them separately.

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APPENDIX A Questionnaire

A Study on Financial Communication Methods: Traditional vs. Online

You have been investing in various companies since the past few years. The present study is to understand the method of financial communication used by organization you prefer.

Information provided by you will only be used for academic purpose and kept strictly confidential. Thank you for participating in the survey.

1. Name:

2. Gender: (a) Male (b) Female

3. Age: (a) 20-35 years (b) 35-50 years (c) 50 years and above

4. Qualification: (a) Undergraduate (b) Graduate (c) Post Graduate (d) Doctorate

5. Family Investment (a) up to 2 lacs (b) 2-6 lacs (c) 6 lacs and above

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11 6. The purpose of your investment is:

(a) Long term wealth creation (b) Tax saving (c) Both (d) Any other reason _______________

7. The methods of communication of financial information opted by companies are being evaluated on the parameters given below. Please tick from 1 to 5 where 1 is the lowest and 5 is the highest:

Parameters Traditional Methods ( includes annual reports, annual general meetings, conference calls, radio, television, newspaper, press releases, letter to stakeholders)

Online Methods

(includes social networking sites, websites, emails, mobile phones)

1 2 3 4 5 1 2 3 4 5

(a)Accessibility (b)Regularity (c)Reliability

(d)Understandability (e)Availability

(f)User-friendliness of the technology used (g)Timeliness (h) Clarity APPENDIX B

Table 1: T-test on gender with other factors

Variables Sig.

Accessibility of traditional methods 0.601 Insignificant Regularity of traditional methods 0.927 Insignificant Reliability of traditional methods 0.674 Insignificant Understandability of traditional methods 0.472 Insignificant Availability of traditional methods 0.781 Insignificant User friendliness of traditional methods 0.97 Insignificant Timeliness of traditional methods 0.545 Insignificant Clarity of traditional methods 0.983 Insignificant Accessibility of online methods 0.635 Insignificant Regularity of online methods 0.411 Insignificant Reliability of online methods 0.609 Insignificant Understandability of online methods 0.669 Insignificant Availability of online methods 0.423 Insignificant User friendliness of online methods 0.485 Insignificant Timeliness of online methods 0.386 Insignificant Clarity of online methods 0.975 Insignificant

Table 2: F-test on age group with other factors

Accessibility of traditional methods 0.957 Insignificant Regularity of traditional methods 0.83 Insignificant Reliability of traditional methods 0.982 Insignificant Understandability of traditional methods 0.895 Insignificant Availability of traditional methods 0.782 Insignificant User friendliness of traditional methods 0.078 Insignificant Timeliness of traditional methods 0.846 Insignificant Clarity of traditional methods 0.887 Insignificant

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Accessibility of online methods 0.451 Insignificant Regularity of online methods 0.356 Insignificant Reliability of online methods 0.919 Insignificant Understandability of online methods 0.539 Insignificant Availability of online methods 0.346 Insignificant User friendliness of online methods 0.043 Significant Timeliness of online methods 0.071 Insignificant Clarity of online methods 0.346 Insignificant Table 3: F-test on educational qualification with other factors

Accessibility of traditional methods 0.305 Insignificant Regularity of traditional methods 0.013 Significant Reliability of traditional methods 0.4 Insignificant Understandability of traditional methods 0.024 Significant Availability of traditional methods 0.33 Insignificant User friendliness of traditional methods 0.181 Insignificant Timeliness of traditional methods 0.081 Insignificant Clarity of traditional methods 0.059 Insignificant Accessibility of online methods 0.668 Insignificant Regularity of online methods 0.746 Insignificant Reliability of online methods 0.589 Insignificant Understandability of online methods 0.212 Insignificant Availability of online methods 0.476 Insignificant User friendliness of online methods 0.067 Insignificant Timeliness of online methods 0.057 Insignificant Clarity of online methods 0.394 Insignificant

Table 4: F-test on family investment with other factors

Accessibility of traditional methods 0.776 Insignificant Regularity of traditional methods 0.429 Insignificant Reliability of traditional methods 0.441 Insignificant Understandability of traditional methods 0.189 Insignificant Availability of traditional methods 0.991 Insignificant User friendliness of traditional methods 0.576 Insignificant Timeliness of traditional methods 0.797 Insignificant Clarity of traditional methods 0.075 Insignificant Accessibility of online methods 0.345 Insignificant Regularity of online methods 0.344 Insignificant Reliability of online methods 0.928 Insignificant Understandability of online methods 0.249 Insignificant Availability of online methods 0.713 Insignificant User friendliness of online methods 0.864 Insignificant Timeliness of online methods 0.987 Insignificant Clarity of online methods 0.685 Insignificant Table 5: F-test on purpose of investment with other factors

Accessibility of traditional methods 0.344 Insignificant Regularity of traditional methods 0.42 Insignificant Reliability of traditional methods 0.468 Insignificant Understandability of traditional methods 0.476 Insignificant Availability of traditional methods 0.544 Insignificant User friendliness of traditional methods 0.458 Insignificant Timeliness of traditional methods 0.241 Insignificant Clarity of traditional methods 0.854 Insignificant

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Accessibility of online methods 0.173 Insignificant Regularity of online methods 0.323 Insignificant Reliability of online methods 0.549 Insignificant Understandability of online methods 0.392 Insignificant Availability of online methods 0.244 Insignificant User friendliness of online methods 0.35 Insignificant Timeliness of online methods 0.125 Insignificant Clarity of online methods 0.696 Insignificant