CHAPTER III: RESEARCH METHODOLOGY
3.7 Methods of data collection 32
Data used in this study are actual and historical information which have been collected using documents analysis method and through the website of the Zimbabwe Stock Exchange.Common data collection methods include questionnaire, in-depth one on one interviews, focus group in- terviews, and direct observations (Cottrell & McKenzie, 2010). The data collection methods are influenced by the nature of the data whether it is primary or secondary (Fowler 1993). Werner &
DeSimone (2011) added that there are three vital issues to consider when deciding which data collection method to use and these are reliability, validity and practicality. For the purpose of this
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research, the researcher relied heavily on in-depth interviews with key informants as the primary data collection methods and documentary reviews.
3.7.1. Research Instrument
The term instrumentation refers to research instruments used by researchers to collect the data needed to test research hypotheses (Corbetta, 2003). This research used interview guide see (Ap- pendix 1) as the main data collection instrument. Interviews are a systematic way of talking and listening to people. Kvale (2007) asserts that interviews are an interchange of views between two or more people on a topic of mutual interest; the centrality of human interaction for knowledge production; and he emphasizes the situations of research data. Interviews are usually the major source of qualitative data from people who cannot be entrusted with the questionnaire; and who may be too busy to allocate time to answer questionnaires and return them to the researchers. In- sofar as this study is concerned, in-depth interviews was used to collect data, since an interpreta- tive approach which is qualitative in nature was adopted for the study. The types of questions were open-ended and descriptive, usually reacting to a given situation presented by the research- er.
3.7.2 Interviews
An interview schedule is an ethnographic tool for structuring a formal interview. It is a prepared form (usually printed or mimeographed) that guides interviews with households or individuals being compared systematically. The difference with a questionnaire is that with interviews the researcher has personal contact with the interviewees and records the answers herself whilst with questionnaires, the respondent fills in the form.
The interview as a research instrument is advantageous where there are fewer numbers of re- search participants involved. The Interviewers can probe deeper into a response given by an interviewee, in a way which is not feasible with questionnaires. Interviews often produce a high- er response rates than questionnaires. For this reason, it is felt that mixed method approach in which the interview is part, is seen to be very well placed.
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According to Popper (2004), the major difference between interviews and questionnaires is that with questionnaires, the respondent read the questions and record the answers with minimal if any assistance from the researcher. On the other hand with the interview, the researcher asked questions to the respondent and record the answers as given by the respondent. This means, in terms of the structure, these two instruments may basically be the same. What was different is the methods of administering and how responses are recorded.
The study uses secondary data obtained from annual reports. The data on the control variables under study have been collected from secondary sources. Data on CSR has been collected from annual reports of companies. In the present study the content analysis was used to extract CSR information from the annual reports. Subsequently the activities were segregated into four cate- gories (community, environment workplace and diverse) covering inventory. The CSR instruc- tion was constructed on review of literature and from annual reports. Interview guides were used to collect self-reports and audited reports from the company about their experiences, and feelings about the issues at stake. The interview guide for finance managers and administrators was semi- structured to allow them to freely express their views about issues at stake in the current study.
Interview guides for will be designed to facilitate collection of data by research assistants and to ensure reliability of research findings.
3.7.3 EMPIRICAL MODEL
Firstly for the researcher to estimate the influence of SRI on financial performance, the research- er applied a regression model of estimated total of 100 companies under study. The researcher regress each type of financial performance, on ESG performance. To construct the econometric models, the researcher identified wing notation.
In the models it is going to explain the ESG factors if it really affects the companies’ operation costs which will result in the decrease in the profitability of a company. The measures would be calculated using the information I am going to obtain from the Annual reports, thus looking at the total costs of the company and the ESG costs.
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In this research, the researcher has developed the models below to find data of 100 companies under the study using the period from 2017 up to 2018; this was discovered using the dependent and independent variables.
1. Yit= β0+ β1ESGit + β2 LEV+ β3 CAP+ β4AGE+ β5SIZEit+ ε
2. ROEit= β0+β1ESGit +β2 LEV+β3 CAP+β4AGE+ β5SIZEit+ ε
3. TQit= β0+ ESGit+ β2 LEV+β3SIZEit+ ε
4. CAPit= β0+β1ESGit +β2 LEV+ β3 AGE+ β4SIZEit+ ε
Yis the financial performance β0 is constant β0, β1, β2, β3 and β4 are the regression co-efficient
Where: Where:
ROEit = Return on Equity (ROE) for company in period t TQit = Tobin’s Q for company i in period t;
CAPit = Capital for company i
ESGit = ESG score for company i in period t SIZEit = Total Assets for company in period t;
LEVit=Leverage for company in period t; in period t; ii ε = Error term.
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3.7.4 VARIABLES
The financial data utilized in this research is collected from participating companies’ annual.
From the financial performance of the company this research is going to use the 100 top compa- nies according to the market capitalization of year 2018. Some of the researches have used the ROE and ROA and the dependent variables size of the company and the leverage of the company asmeasurement of financial performance (Sarumpaet, 2005). Nevertheless, these indicators are applied to the dependent variables of the study.
Return on Assets
The dependent variable the researcher is going to use is the Return on Assets (ROA) and Return on Equity (ROE) and measured using the models for measuring the firm’s financial performance.
According to Meloand (2011) the indicators of the dependent variables may vary depending on which one chooses the accounting based or market based indicators.Investors are concerned with firms that have are engaged in ESG disclosure that does not affect its profitability.From the an- nual reports I am going to consider the pushing reports of environmental and social disclosure which will influence the stakeholders.
Return on assets (ROA) is a measure commonly utilized when estimating a firm’s economic per- formance and profitability (Belu & Manescu, 2013). Compared to a market based measure such as Tobin’s Q, ROA is a measure of which represents the financial performance within the firm (Guenster et al, 2011). According to Russo & Fouts, (1997), this type of measure is generally considered to be representing a firm’s financial performance. Moreover, a large body of previous research has utilized ROA when examining the relationship between CSR and financial perfor- mance (Tang et al., 2012). Russo & Fouts, (1997) used ROA as a measure in order to see if envi- ronmental performance were positively related with a firm’s financial performance. In another research made by (Moon et al., 2014) utilize ROA to see if companies participating in voluntary environmental programs experienced a positive effect on its financial performance. As ROA is a well-known and generally accepted measure when examining the relationship between CSR and financial performance, this study will utilize ROA as an accounting based financial measure. The
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formula used for calculating ROA is inspired by Hackston & Milne (1996) who calculated a firm’s ROA as the firm’s net profit divided by total asset:
ROA = Net Profit/Total Assets ESG---Measuring SRI
Firm CSR performance has become an increasingly important criterion for Socially Responsible Investing (SRI) initiatives. Measuring CSR during the course of the past several decades, a large number of researchers have chosen to apply methods which attempts to measure overall CSR performance of firms, such as the KLD Index. The KLD Index (nowadays known as MSCI ESG Research) evaluates companies CSR performance based on eight different attributes (Waddock
& Graves, 1997; McWilliams & Siegel, 2000; Tang et al., 2012; Pätäri et al., 2014). KLD is a test that was used to find information of primary data source and have passed several test of va- lidity (Sharfman, 1996). The test was used to gather data from primary data source.