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The Determinants of Working Capital Management Practices: A Malaysian
Perspective
Research Proposal
By: Mohd Ridzuan Darun
Student ID: 1075703 Accounting Group
Commerce Division Lincoln University
Supervisor: Dr. Jamal Roudaki
Senior Lecturer
Associate Supervisor: Jack Radford Senior Lecturer
25th August 2008
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Abstract
Purpose – This study investigates the practice of Working Capital Management (WCM) in the Malaysian context, particularly in Malaysian listed companies. Even though a number of studies about WCM were undertaken in many countries around the world, especially in Western countries, the understanding about how to manage working capital is not explicit. To date there has been no study examining the Malaysian context. Prior research in this area has focused on two approaches 1) surveys seeking to examine the relationship between WCM and corporate performance, and 2) the development of optimisation models to improve WCM performance. In the event of changes in industry context, it is argued that the failure of WCM research to reflect the characteristics and challenges of contemporary organizational settings has led to a loss of relevance and gives rise to the need for a conceptual framework explaining current WCM practices. This study is intended to first develop an understanding of the determinants of the various WCM practices currently used in organizations; and secondly to develop a conceptual framework explaining the dynamics of WCM in Malaysian context.
Design/methodology/approach – This research will use multiple case studies, with participating organizations selected from the main board at the Bursa Malaysia. Key informants will be chosen to ensure that the collection of data illustrates the patterns of WCM practices in organizational settings. The research questions are designed to explore the diversity of decision-making processes related to WCM practices. This study will use semi-structured interviews, and secondary evidence to interpret WCM practices. Qualitative data analysis will be used to analyze the evidence.
Limitations and Delimitation – The main limitations of this study will be the constraints due to limited time and financial support. The researcher is required to allocate a long period of time on actual sites to investigate and understand the WCM practices. However, a coherent system in collecting and analyzing data should minimize the risks of research process.
Significant of Study – This study will contribute to the body of knowledge by identifying how Malaysian companies manage their working capital. This study will provide a general framework to researchers, policy makers, professionals and managers to guide future researches, reappraise current business practices, and provide basic guidelines for policy makers in rapid changing of business environment of Malaysia. Keywords – Working Capital Management, Management Accounting Change, Corporate Practice, Corporate Performance.
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Table of Contents Abstract ...................................................................................................... ii
Table of Contents...................................................................................... iii
List of appendices ..................................................................................... iii
1. Introduction..........................................................................................................1 2. Research Questions..............................................................................................3 3. The Significance of this Study.............................................................................4 4. Literature Review ................................................................................................4 5 Research Methodology – Qualitative Study ......................................................9
5.1 Multiple Case Studies.................................................................................10 5.2 Research Sequence.....................................................................................11 5.3 Case Selection .............................................................................................13 5.4 Collecting Evidence....................................................................................14 5.5 Data Analysis..............................................................................................17
6. Limitations and Delimitations ..........................................................................19
References.................................................................................................20
List of appendices Appendix 1: Research Schedule ..................................................................................24 Appendix 2: Research Budget .....................................................................................25
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The Determinants of Working Capital Management Practices: A Malaysian Perspective
1. Introduction The significant decline of corporate performance during the late 1990s
financial crisis saw corporations in South East Asia, including Malaysia, paying more
attention to Working Capital Management (WCM) (Claessens, Djankov, & Xu,
2000). For example, Telekom Malaysia’s, one the largest listed companies in
Malaysia, main concern is to improve WCM due to customers’ slow payments after
the financial crisis and rival companies offering competitive rates have made cash
collection even more difficult (Crane, 2001). According to a survey by REL
Consultancy Group, Asian companies including those in Malaysia are gradually
improving their WCM performance, but still have long way to go to equal the WCM
performance of other multi-national corporations (Bacani, 2007). Even though a
number of studies about WCM were undertaken in the countries around the world,
especially in Western countries, the understanding about how to manage working
capital in Malaysian context, particularly Malaysian listed companies, is not explicit.
Improving WCM is reasonably important for companies to withstand the
impacts of economic turbulence (Reason, 2008). Alternatively, efficient WCM is also
essential for companies during the booming economic periods (Lo, 2005), for the
reason that WCM is related to all aspect of managing current assets and current
liabilities (Emery, Finnerty, & Stowe, 2004; Hampton & Wagner, 1989; Hill &
Sartoris, 1992; Scherr, 1989; Vander Weide & Maier, 1985). WCM is not only to
immunise corporations from financial upheaval but can be managed strategically to
improve competitive position and profitability. The wider perspectives of WCM
contribute to the greater opportunities to create wealth. Increasing the speed of a cash
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cycle through receivable and payable management helps generating more profitability
and liquidity (Johnson & Soenen, 2003). Further, effective inventory management is
also critical to the management of liquidity and profitability in many companies.
Investigating the determinants of WCM in an organizational setting provides
valuable information that can be used in formulating an effective WCM strategy. To
date much of WCM research is dominated by either positivist (Anand & Gupta, 2001;
Filbeck, Krueger, & Preece, 2007; Filbeck & Krueger, 2005; García-Teruel &
Martínez-Solano, 2007; Lazaridis & Tryfonidis, 2006) or normative (Baker & Damon,
1977; Crum, Klingman, & Tavis, 1983; Damon & Schramm, 1972; DeLorenzo, 2002;
Loeser, 1988; Maness, 1994; Richards & Laughlin, 1980; Sartoris, Hill, & Kallberg,
1983; Shulman & Cox, 1985; Wadhwa, Kanda, Bhoon, & Bibhushan, 2006) studies
focusing on the relationship between corporate performance and WCM.
The individual components of WCM -- cash, receivables, payables, and
inventory management – influence the WCM performance in different manners
(Schilling, 1996). In addition, the decisions made in any one WCM components have
an impact on the other WCM components (Sartoris et al., 1983). Since a WCM
involves the full range of business processes, meaning effective WCM should be
integrated along the processes in order to maximize organizational performance
(Crum et al., 1983; Damon & Schramm, 1972). In this regard, a study in New Zealand
by McInness (2000) showed that 94% of companies did not integrate their WCM
components as proposed by the theory. Practitioners feel that sophisticated financial
decision-making techniques are not practical as they contain unrealistic assumptions,
cannot be explained to top management, and are difficult to implement (Trahan &
Gitman, 1995).
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However, these studies fail to explain the dynamics of WCM from actual
organizational settings. Therefore this study addresses (i) who is involved with
working capital decision-making, and (ii) how managers make decisions and organise
working capital processes.
The development of a theory about as well as interpreting the practice of
WCM should be cognisant of the surrounding organizational environment. Further,
theory and practice exist in a reciprocal relationship. While theory can be used to
guide practice, theory itself should be developed from an interpretation of practice. It
is argued that the failure of WCM research to reflect the characteristics and challenges
of contemporary organizational settings has led to a loss of relevance and gives rise to
the need for a conceptual framework explaining current WCM practices. The first
step to narrow this gap is to understand the WCM practices in actual organizational
settings, particularly in Malaysian listed companies. The second step is to develop
conceptual framework explaining the determinants of WCM practices thus providing
a guide in formulating effective WCM strategies in Malaysian context.
Therefore this study is intended to:
Develop an understanding the determinants of the various WCM practices
currently used in Malaysian listed companies
Develop a WCM conceptual framework explaining the dynamics of WCM
of Malaysian listed companies.
2. Research Questions The primary research question is: How is working capital managed in Malaysian
Listed Companies’ context? Two secondary questions are designed to answer this
primary question.
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2.1 First, to develop an understanding of the determinants of various WCM practices
currently used in Malaysian listed companies: Do managers of Malaysian listed
companies integrate WCM components in their decision-making processes?
2.2 Second, to develop a WCM conceptual framework explaining the dynamics of
WCM of Malaysian listed companies: How do internal and external factors
affect the WCM?
3. The Significance of this Study The purpose of a conceptual framework is to explain the determinants of
WCM practices thus providing a guide in formulating effective WCM strategies in
Malaysian context. In addition, this study will contribute to the body of knowledge
by identifying how Malaysian listed companies manage their working capital in local
setting. By developing a conceptual framework, this study will provide a general
WCM framework for researchers, policy makers, professionals and managers to guide
future research, reappraise current business practices, and provide basic guidelines for
new policies in dynamic business environments.
4. Literature Review
An extensive literature review conducted to identify the direction of this study,
the WCM literature explains the basic purposes of WCM components and the
integration of WCM components in decision making processes. Furthermore, the
WCM literature illustrates internal and external factors that influence the WCM
performance.
4.1 WCM Components
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WCM processes involve crucial decisions on multiple aspects, including the
investment of available cash, maintaining a certain level of inventories, managing
account receivables, and account payables. However, WCM is not limited to these
tasks, but is implicated in multiple levels of interactions both internally and between
external parties (suppliers, customers, distributors, bankers and retailers). For example
credit officers are required to investigate credit history of their clients in order to
understand their financial worthiness. Furthermore, WCM can be narrowed to four
important components -- cash, receivables, inventory, and payables management --
which will be briefly explained in this section.
The purpose of cash management is to determine the optimal level of cash
needed for operation and invested in marketable securities, which suitable for the
nature of business operation cycle (Emery et al., 2004; Gitman, 2009; Scherr, 1989).
The challenge of cash management is to balance the appropriate level of cash and
marketable securities that reduce the risk of insufficient fund for operation and
opportunity cost of holding excessively high level of these resources. Thus, a
company’s competency to synchronize cash inflows with cash outflow, by using cash
budgeting and forecasting in formulating a cash management strategy is important.
Inventory plays an important role to determine the activities in producing,
marketing, and purchasing. Since inventory determines the level of activities in a
company, managing it strategically contributes to profitability (Hill & Sartoris, 1992).
Supplier selection process and inventory management are reciprocal to enable
companies to deal with uncertainties of consumer demand. Furthermore, a company’s
ability to respond to demand is largely dependent on how efficient the company
manages inventories and how committed its suppliers are to support a company’s
production lines.
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Accounts payable are one of the major sources of unsecured short-term
financing (Gitman, 2009; Hill & Sartoris, 1992). Utilising the value of relationship
with payee is a sound objective that should be highlighted as important as having the
optimal level of inventories (Hill & Sartoris, 1992). As a consequence, strong
alliance between company and it suppliers will strategically improve production lines
and strengthen credit record for future expansion.
Profit may only be called real profit after the receivables are turn into cash.
The management of accounts receivable is largely influence by the credit policy and
collection procedure. A credit policy specifies requirements to value the worthiness
of customers and a collection procedure provides guidelines to collect unpaid invoices
that will reduce delays in outstanding receivables (Hill & Sartoris, 1992; Richards &
Laughlin, 1980). Aligning the receivable management between cash, inventory and
payable management is relatively challenging and important, and a stimulus to
researchers’ studies to integrate the WCM components.
4.2 Integration of WCM Processes
For the past 35 years, WCM research has developed various approaches to
integrate the WCM components. The integration of the WCM components in
decision making is considered as main stream research. According to Table 1,
research in the integration of WCM can be divided into three categories, integration
between receivables and inventory, integration between inventory and payable, and
integration of all the WCM components.
The correlation of WCM components means that the decisions made in any
one component will impact on other units within the organization (Sartoris et al.,
1983). For example, the inventory manager’s decision on the level of raw materials,
if the amount of inventory is excessively high, other WCM components (receivables
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& payables) will share the risk and should react to reduce the volume of finish goods
in order to stretch the profit margin. As a consequence, ineffective inventory
management will have an impact on company’s profitability, by holding cost and risk
of unsaleable products.
Table 1: The Integration of WCM Research Categories References Integrate Receivables and Inventory
(William Beranek, 1963); (Shapiro, 1973); (Bierman, Chopra, & Thomas, 1975); (Sartoris et al., 1983)
Integrate Inventory and Payable
(G. Hadley, 1964); (William Beranek, 1967); (Haley & Higgins, 1973)
Integrate of all WCM components
(Damon & Schramm, 1972); (Baker & Damon, 1977); (Crum et al., 1983); (Thompson, 1986) (Kim & Chung, 1990)
Since the WCM components are correlated, to integrate the decision making
process between business units is an ideal solution to manage the WCM. However, a
study about WCM integration in New Zealand (McInnes, 2000) showed that 94% of
companies did not integrate their WCM components as proposed by the theory.
Unfortunately, WCM literature lacks explanations of why and how managers integrate
or disintegrate the WCM components. Hence, to extend the understanding about the
causes, behaviours, and affect of WCM integration, this study will seek explanations
from the managers why and how their companies integrate the WCM decision making
process, whereas some companies did not.
4.3 Factors Influencing WCM
The management of working capital is influenced by external and internal
factors (Table 2). While external macro-factors are affecting all companies, regardless
industry, only companies within a particular industry are affected from external
micro-factors. However, both opportunities and threats can arise from any of them. At
an organization level, a set of internal factors impacts on all processes and activities,
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including WCM, but in different manners according to the direction and relationship
between them. Consequently an ability to interpret and respond to the changes in
these environmental variables is critical (Johnson & Soenen, 2003), the managers
who involving in WCM.
Table 2: The Internal and External Factors that Affect WCM 1. External Factors What may affect WCM References:
i. Politics (Ketchum, 1942), (Ketchum, 1943), (Carey, 1949), (Carey, 1949)
ii. Business and economic environment
(Herbst, 1974), (Ben-Horim & Levy, 1983)
iii. Between Industries effect (Hawawini, Viallet, & Vora, 1986)
a. Marco level factors
iv. Legislation (Peel, Wilson, & Howorth, 2000)
i. Customer needs/requirements (Bielenberg, 1992), (Reyman, 2005) ii. Financing
requirements/methods (Holdren & Hollingshead, 1999), (Strischek, 2001), (Cocheo, 2004)
iii. Technology (Wood, 1993) iv. Supplier covenants
/collaboration (DeAngelo, DeAngelo, & Wruck, 2001), (Wadhwa et al., 2006)
v. Competitors effect (Filbeck & Krueger, 2005),
b. Micro level factors
vi. Shareholders wealth (Filbeck et al., 2007) 2. Internal Factors What may affect WCM References:
i. Management System/Method/Practice
(Knight, 1972), (Edwards, Wagner, & Wood, 1985), (Fredenberger, DeThomas, & Ray, 1993), (Sathyamoorthi, 2002), (Deloof, 2003), (Johnson & Soenen, 2003), (Srivastava, 2004), (Jaiswal & Kaushik, 2005), (Lazaridis & Tryfonidis, 2006), (García-Teruel & Martínez-Solano, 2007)
ii. Organizational behaviour (Loeser, 1988), (Krishna, Dmitri, & Victor, 1993)
iii. Investment policy (Seidner, 1990) iv. Management financial
capability (knowledge) (McMahon & Holmes, 1991), (Abdul Rahman & Mohamed Ali, 2006)
v. Operation management /Supply Chain management
(Bartezzaghi, Turco, & Spina, 1992), (Evans, Naim, & Towill, 1993), (Rafuse, 1996), (Fairchild, 2005), (Sehgal, Sahay, & Goyal, 2006)
a. Macro level factors
vi. Upstream collaboration /outsourcing
(L. Hadley, 2006)
i. Inventory management (Raman & Kim, 2002), (Yang, Ronald, & Chu, 2005)
ii. Employees financial capability (knowledge)
(Cheatham & Cheatham, 1993), (Hossain & Akon, 1997)
iii. Credit policy/Collection management
(Walia, 1977), (Kolay, 1991), (Ooghe, 1998)
b. Micro level factors
iv. Payable Management (Gitman, 2009)
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An extensive survey of the literature from various academic disciplines shows
few studies on the Malaysian context. In the United Kingdom legislation addresses
how small business holders go about charging interest on overdue invoices (Peel et
al., 2000), to protect small enterprises who are highly dependent on efficient working
capital. Of course, the UK legislation may not suit the Malaysian context: measures
must be attuned to relevant cultural and social circumstances. Consequently, this
study will seek data (policies/legislations/regulations/research) from relevant local
authorities (e.g. Central Bank of Malaysia, Economic Planning Unit, Malaysian
universities, and research institutions) and from the array represented within
Malaysian listed companies to establish linkages between external factors and WCM,
and how these factors influence WCM.
5 Research Methodology – Qualitative Study
The dilemma of management to integrate WCM processes initiated this study,
even though WCM research indicates alternatives to improve the WCM components
by integration. It is argued that the failure of the WCM research to reflect the
characteristics and challenges of contemporary organizational settings raised the need
to gain an in-dept understanding of WCM practices in actual organizational settings.
The approach adopted is primarily qualitative in seeking the in-dept understanding of
complex phenomena by gathering data which provide a detailed description of event,
situations and interaction of people in their natural settings (Cooper & Schindler,
2006, p. 198).
Since the research question will determine the research strategy (Yin, 2003),
this study aims to answer the primary research question, “How is working capital
managed in Malaysian Listed Companies’ context?”. The how and why questions are
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more explanatory and likely to used case studies strategy (Yin, 2003), in contract, the
use of survey (quantitative) by identifying the frequency and tendency will not be able
to provide rich information of WCM practices. While, Berry and Otley (2004) state
that case study is especially suited to understand the content, processes and contexts
of the practice of accounting . Hartley (2004) further confirm that case studies are
increasingly used in organizational studies because of growing confidence in case
study methods as a rigorous research strategy in its own justification.
5.1 Multiple Case Studies
This study aims to understand the various practices around WCM currently
used in Malaysian listed companies. As a result, multiple case studies will be used in
this study to permit the researcher to observe replication between organizations for
conceptualization purposes. Multiple-case studies provide a stronger base for theory
building (Yin, 2003). Eisenhardt and Graebner (2007) emphasized that multiple cases
generate more robust theory because the propositions are more deeply grounded in
diverse empirical evidence.
The use of multiple case studies will provide valuable information to
formulate the conceptual framework. The evidence collected from different
companies indicates the vigorousness of research findings. However, the conceptual
framework will not complete without extended knowledge of Malaysian socio-
economic environment. Therefore data contained within policies, legislation,
regulations, and research will be sourced from local authorities (e.g. Malaysian
Central Bank, Economic Planning Unit, Malaysian universities, research institutions,
and so forth) that related to WCM. The knowledge gained from Malaysian local
settings will be used as part of the factors that may influence the WCM performance.
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To summarize the research process: this study will collect and analyse the data from
multiple case studies and local authorities to formulate a conceptual framework which
explain the dynamic of WCM in Malaysian context.
5.2 Research Sequence
This study consists of two sequences both of which serve the purpose of
understanding the determinants of WCM and ultimately developing a conceptual
framework. Further, each sequence consists of multiple stages dealing with relevant
literatures and actual practices (Figure 1). Scapens (2004) explained that working
with case studies requires a comprehensive research plan, specified research
questions, and all evidence should be recorded to ensure ‘procedural reliability’.
Figure 1: Research Methodologies
5.2.1 Research Sequence 1
The research sequence 1 consists of three stages which will be briefly
explained in this section;
Using Literature Review to develop Research Directions
Qualitative Data Analysis and Discussion
Multiple Case Studies
In-dept interviews Observations Documents
Developing Conceptual Framework
Refine Research Instruments using Focus Group Discussion
Research Sequence 1
Stage 1 Stage 3 Stage 2 Final Output
Research Sequence 2
Using Literature Review to identify what influences WCM decision
Understanding Malaysian Environment Legislation Policies Studies Reports Literatures
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Stage 1: Using literature review from various academic disciplines (accounting,
finance, strategic management, operation management, and organizational
behaviour) to identify the research questions.
Stage 2: Using research questions as a topic of focus group discussion (consist of
management accountants, financial controllers, or CFO) to refine research
instruments for fieldwork.
Stage 3: Using research instruments to collect relevant data by using multiple case
studies. Semi-structured interviews will be undertaken with key informants
who are directly involved with WCM. The interviews will be transcribed for
analysis, and stored according to appropriate ethical standards. Archival
records will be accessed (also through appropriate ethical process) to provide
further insight. Data will be coded, categorised and themed for theoretical
constructs and narrative explanations.
5.2.2 Research Sequence 2
The research sequence 2 consists of two stages which will be briefly explained
in this section;
Stage 1: Using the literature of accounting, strategic management, organizational
behaviour, operations management, and finance, internal and external factors
that may affect WCM performance will be identified.
Stage 2: An extensive survey of this literature shows limited evidence related to
WCM in Malaysian context because many WCM studies were done in
Western countries. Therefore, this study requires relevant information from
local authorities (e.g. Malaysian Central Bank, Economic Planning Unit,
Malaysian universities, research institutions, and so forth) to extend the
understanding of Malaysian socio-economic environment.
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5.2.3 Developing Conceptual Framework
The final output of this study is to develop a conceptual framework that
explains the determinants of WCM practices in the Malaysian context. Using the
output from research sequences one and two, a process of triangulation will be used to
validate the theoretical conjecture from the literature review with the multiple cases
research findings. This process will require a constant comparison of data to develop
the conceptual framework, in coherent manner.
5.3 Case Selection
In this study, participating companies will be purposely selected from different
industries. Randomness is not explicitly sought because as Eisenhardt (1989, p. 537)
states, “The sample was not random, but reflected the selection of specific cases to
extend the theory to a broad range of organizations”. The participating companies
will be selected from two sectors, 1) consumer products and 2) trade and services.
These sectors are selected because the attempt given to improve WCM performance is
greater. Further, companies in these sectors are mainly involved with manufacturing
and/or service activities that consists of the elements of WCM (e.g. payables,
receivables, inventories).
The selected companies should be categorized as large scale companies and
publicly listed on the main board at Bursa Malaysia. Malaysian listed companies are
required to comply with the International Financial Reporting Standard (IFRS) and
this standard indicates companies operating in Malaysia are obligated to demonstrate
effective management practices.
In this study, WCM practices will be observed and Malaysia is selected as a
location because of the researcher’s knowledge of local business environment. The
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researcher’s knowledge of local business environment may contribute to understand
the determinants of WCM practices from Malaysian context.
One of the challenges in this study is to gain access into the participating
companies. The sample size for this study cannot be established in advance; this is
determined by the concept known as the level of saturation (Auerbach & Silverstein,
2003). In this study, the iteration between theory and data should stop when the
incremental contribution to concept is minimal; a stage known as theoretical
saturation (Eisenhardt, 1989).
The process to gain access into Malaysian listed companies will include the
following procedure;
a) Selecting process (companies will be selected based on the specified criteria);
b) The selected companies will be notified by formal letter;
c) Follow up letter to remind the companies;
d) Follow up calls with appropriate officers to establish the connection;
e) Courtesy visits (if needed);
f) Gained access or more companies added to the candidates list.
This study will require approval from the Human Ethics Committee (HEC) of
Lincoln University, the purpose of the HEC is to scrutinize that all research at Lincoln
University which involves human participants meets established ethical standards.
The human ethic approval will be used as one of the incentives for participants to
ensure high quality of research and encourage their cooperation to the study.
5.4 Collecting Evidence
One of the crucial elements in case study approaches is to collect appropriate
evidence, which will be discussed in this section.
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5.4.1 Primary Evidence
Prior to the collecting evidence, focus group discussion will be conducted.
Focus group will be directed through the research questions to help refine research
instruments (e.g. further questions for informants) as well as help identify sources of
data (e.g., archival records). Focus group will also help identify the appropriateness of
the chosen data collection procedures, refine the data collection plans, and clarifying
research questions and research design (Yin, 1994). In this study, focus group
discussion should consist of management accountants, financial controllers, or CFO
from Malaysian listed companies because they should provide appropriate
information of WCM practices from their organizational context. Since many
corporate offices are located in Kuala Lumpur, the focus group discussion will be held
in the capital city of Malaysia.
In focus group discussion, researcher will be able to discuss with key
informants how managers integrate/disintegrate the WCM decision making and what
issues arise in the process. Focus group discussion is a good platform for researcher
to identify WCM important issues in advance and possibly realigned research
instruments. After focus group discussion, researcher will produce the revised version
of research instruments, implementing of input obtained through the discussion.
During the data collection, the researcher will be visiting the participating
organizations where most of the WCM related executives are located, i.e., Kuala
Lumpur, Malaysia. As primary evidence, semi-structured interviews will be used in
this study where open and close ended questions will be combined. Close ended
answers will enable researcher to find replication which can be compared and linked
with other interviewees. Open ended questions will give interviewees flexibility to
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express their experience and to explore the issues in depth and to follow up the
responses that are given by the interviewees.
Theoretical sampling illustrates that participants are selected because they are
particularly suitable for illuminating and extending relationships and logic among
constructs (Eisenhardt & Graebner, 2007). In this study, interviewees will be
purposely selected to ensure only qualified professionals contribute to the collection
of evidence. Key informants related to WCM decision-making processes from
participating organizations will be interviewed to understand the WCM practices.
These key informants of WCM decision making processes will primarily be drawn
from Financial Controllers, Management Accountants or Chief Financial Officers
(CFO) because most of their time dedicated to manage, monitor, evaluate and develop
the WCM processes and strategy (Anand & Gupta, 2001; McInnes, 2000).
In this study, key informants will inform the researcher to the next interviewee
that might be able to clarify the issues. This process is also known as snowballing
technique. During interview sessions, researcher should be alert of any informal
clues, which could identify to new issues. Therefore, the researcher may ask further
questions which may extend the topic or clarify the issues.
5.4.2 Secondary Evidence
The researcher will require secondary information to interpret the dynamics of
WCM practices currently used in companies. In this study, other information such as
organizational structure, company strategies, WCM policies, managers’ meeting (non-
participant observation) and financial annual reports may be used to interpret the
WCM practices. For example, for companies using a make to order strategy (amount
of ordered products will determine the level of production) will require a specific
method of WCM strategy. Moreover, credit policy and inventory strategy also need to
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be examined to assist researcher explaining how managers manage the working
capital activities.
The conceptual framework of WCM from Malaysian context is not complete
without extended knowledge of the Malaysian socio-economic environment. In the
research sequence two (refer to 5.2.2), researcher will require information from local
authorities to discover the linkages between external and internal factors in relation to
WCM. The understanding of Malaysian local setting should consists of areas that
may have affected the WCM performance, such as Malaysian political influence,
social aspects, economic stability, legislation, financial regulation, industrial effect,
and so forth. The local authorities, Malaysian Central Bank, Economic Planning Unit,
local universities, and research institutions have conducted studies, compiled reports,
and collected information that link local business environment with the performance
of Malaysian listed companies. However, this information is not available
electronically; therefore, researcher should visit the respective institutions with formal
letters to gain access the information needed. This information may be useful to
validate the influence of external factors in WCM decision making process of
managers at Malaysian listed companies.
5.5 Data Analysis
In this study, the primary and secondary evidence will be transcribed into text
format and coded to appropriate categories. According to Lofland, Snow, Anderson,
& Lofland, (2006), analysing qualitative evidence involves coding data into categories
that organize it and portray it to one or more frameworks or set of ideas. The coding
process will employ predetermined categories. However, as different issues arise
during study, new categories will be created to illustrate the pattern explaining the
dynamic of WCM practices. One of the advantages in the case study approach is the
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opportunities to view issues from the eyes of research participants, which involve
narratives and dialogues in telling stories and presenting other evidence that arise
from their natural settings. Case study researchers frequently discover new issues
during their journey (Auerbach & Silverstein, 2003).
Figure 2: Operational of Multiple Case Studies
The conceptual framework of WCM will be built through a process of
triangulation that uses the results of literature reviews and empirical evidence from
multiple case studies. In analysing the empirical evidence (Figure 2), each of the case
reports should explain how and why a particular proposition was or was not identified
(Yin, 2003). On the other hand, in across cases, the explanations of why the
replication of patterns identified in certain cases, but not in other cases (Yin, 2003).
Further, developing theoretical narrative is particularly difficult when dealing with
increasing number of companies (Eisenhardt & Graebner, 2007). Therefore,
Eisenhardt and Graebner (2007) suggested that building a concept in sections or by
important propositions that are supported by evidence will be a practical way to solve
the challenge. Further, summarizing each case evidence using tables and organizing it
Research Questions and Objectives
Screen Case Study Nominations
Prepare for Data Collection
Collect Evidence Case 1
Collect Evidence Case 2
Collect Evidence Case x
Analyse the Case Study Evidence & Report Case 1
Analyse the Case Study Evidence & Report Case 2
Analyse the Case Study Evidence & Report Case x
Source: Yin (2003, p. 50)
Write multiple case studies
Make Implications of the research
Develop Conceptual Framework
Analyse Multiple Cases
Define and Design Prepare, Collect & Analyse Analyse & Conclude
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in a coherent manner will structuralize the conceptualisation process (Eisenhardt &
Graebner, 2007).
Since the interviews and archival records will be used for data analysis, the
amount of data is suspected to be large. Thus, this study requires a systematic
approach to organize the data. Fortunately, the NVivo8 software intends to support
researchers to manage data, manage ideas, query data, graphically model, and report
from the data (Bazeley, 2007). NVivo8 software will assist researchers to organize
data in a systematic manner and to recognize the pattern lies between the data. The
software also will assist the researcher in the concept-building process. The
development of a conceptual framework will be more organized and effective if the
use of NVivo8 is fully utilised.
6. Limitations and Delimitations The main limitations of this study will be the constraints due to limited time
and financial support (Appendix 1 & 2). The conceptualisation process requires an
understanding from large amount of data. Collecting appropriate evidence is essential
to analyse the data and various modifications to categories will lengthen the period.
Hence the longer research takes, the higher the cost of the project.
The limitations can be minimised by organizing the research process more
effectively. Scapens (2004) suggests the following procedures to manage the case-
based studies more effectively,
a) All evidence collected should be recorded in an ordered and systematic
manner;
b) Notes and memos should be converted into a more formal record as soon as
possible; and
20
c) It is suggested that researcher should have plenty of time in between
interviews to gain focus on the issues by relating interviews previously
conducted, expecting some directions or explanations from next interview, and
how to conduct appropriate interviews that lead to important evidence.
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Appendix 1: Research Schedule
This project began since 2nd July 2007 and the completion of the project will be on the 31st Aug 2010. The activities and period will be allocated as follows:
Activities/Time Line 7’07 9’07 12’07 3’08 6’08 9’08 12’08 3’09 6’09 9’09 12’09 3’10 6’10 8’10
Develop Research Question
Literature Review
Write Research Proposal
Present Research Proposal to Commerce Division
Research Approval
Refine Research Instruments/Human Ethic Committee Approval
Understanding of Malaysian Local Setting
Determinants of WCM/Conceptual Framework
Write Thesis & Result Presentation
Defend Thesis
Editing and Binding
Submit thesis
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Appendix 2: Research Budget Description Cost (NZD)
1 Printing and Photocopying 2 NVivo8 Training (25th July 2008) 3 Editing Assistance (20 hours x NZD20) 4 Thesis (4 copies x NZD80) 5 Focus Group Discussion (Sept-Oct '08)
5.1 Airfare (Christchurch-Kuala Lumpur) 5.2 Rental of Meeting Room (with lunch for 10 people)
6 Multiple Case Studies/Understanding Malaysian Local Setting (February '09 - June '09)
6.1 Airfare (Christchurch-Kuala Lumpur) 7 Domestic/International Conference
7.1 TBA Total
Note:
* If the budgeted amount is not sufficient, the researcher will pay any additional charges occurred from the conference.