Impact of Capital Structure on Financial Performance of Real Estate Firms Listed in Stock Exchange - Essay Example

Impact of Capital Structure on Financial Performance of Real E Firms Listed In Chinese Stock Exchange Table of Contents Research Methodology 3 Research Design 3 Research Philosophies 4 Research Approach 5 Data Collection Method 6 Data Analysis 7 Limitation 8 References 9 Research Methodology Research Design Success of any research study is heavily dependent and can only be achieved through the selection of proper techniques and methods during the collection of necessary data. Besides, the desired aim and objective of the research relate with the selection of appropriate method in line with the research subject. In order of derive the outcomes of the research study aimed at determining the role and impact of real estate organisations’ capital structure on their financial performance, a specific research design has been followed. Initially, it was quite important to obtain a brief understanding of the theoretical aspects related to the capital structure and its role in the performance of the company, which assisted significantly in the formation of specific research objectives. The next phase, of the research emphasized gathering of necessary data, wherein secondary sources that includes utilising the official website i.e. ‘Shanghai Stock Exchange’ have been utilised to extract data. Subsequently, the related data gathered using the secondary sources were analysed with the assistance of a quantitative approach using the statistical tools i.e. correlation and regression. Finally, an in-depth analysis was conducted based on the collected data to ensure valid and justifiable conclusions based on the obtained findings (Bergh & Ketchen, 2009). Correspondingly, this chapter of the dissertation intends to provide an in-depth and comprehensive understanding of how this research study was carried out through the collection of reliable data and information to derive the ultimate objective of research. Research Philosophies The objective of the research study was to determine the impact of organisations’ capital structure over the financial performance of the business. In this regard, the financial performance of the 20 listed real estate companies, in the Chinese stock exchange, was taken into the consideration. In general context, based on the objective of the research, a study can be carried out using positivism, realism, interpretivism, or pragmatism philosophical approaches. However, particularly in order to achieve previously mentioned research aims and objectives, interpretivism philosophy was utilised in this research study. The reason behind using interpretivism philosophy in this particular research study is owing to its advantages in the collection of needful data and information, maintaining high level of reliability, validity, and generalisability of the facts representing the financial position of the companies. Furthermore, ‘SSE Composite Index’ has been utilised in the study, as it consists all the stock market index of A shares and B shares, which are traded in the stock exchange. In relation to it, applying the interpretivism philosophy, the data will be interpreted using the involvement of human interest in study in order to access the reality. Besides, applying the interpretivism philosophy, rigid structural framework could be avoided that possibly arises in the context of other philosophies and enhance flexibility in determining the results of the study. Nevertheless, interpretivism philosophy has its roots in the phenomenology segment that is highly appropriate in quantifying the data and information to verify the hypothesis tested (Kelliher, 2005). Research Approach The proposed research study was conducted with an expectation to deliver a critical perspective on the impact of capital structure developed and practiced by listed Chinese companies on their financial performances, which demanded equal significance to both favouring and countering facts to the research objective. Any research study can follow the approach of deductive or inductive methods to derive the ultimate objective, which allows the adjustments and assessments of positive and negative facts related to the research subject. Inductive approach is deemed effective in developing theoretical models, especially when data scarcity exists along with an objective of claiming new findings to the research issue rather than testing a hypothesis as in this case. On the other hand, using the deductive approach, researcher needs to form a hypothesis or a theory and accordingly, make the strategy to test the assumption as valid or not. Correspondingly, as this research study intended to examine a set assumption – that whether the capital structure of listed companies in China affect their financial performances - the inductive research approach was used. The rationale of using this particular research approach is that it is consider as the appropriate approach for developing a clear understanding regarding the factors driving the impact of financial performances based on the capital structure of the company. Moreover, an inductive approach of the study will be considered to concentrate on the stated issue of the research based on a small sample of 20 subjects. Furthermore, with the use of inductive approach, different strategies as well as choices were developed to justify the research issue that would significantly assist in deriving relevant outcomes to the research and disregard all those, which did not. Nevertheless, the inductive approach has significantly assisted in taking highly informed decisions regarding research designing (Jebreen, 2012). Data Collection Method Data collection method plays an integral role in any research study, through which, reliable data and information are gathered in order to accomplish the desired aims and objectives of the research study in a much proficient manner. Moreover, in the research study, high quality data needs to be gathered in order to evaluate the key issue of the particular research. In the context of any research study, the relevant data and information can either be obtained through primary or secondary sources and by utilising both the sources as well. From the theoretical perspective, primary data collection is referred as the method of data collection using the ‘semi-structured’, ‘unstructured’, ‘in-depth’, or ‘conversational’ means, primarily from the selected samples. In certain research studies, data will be collected using the interview method through face-to-face conversation or online survey. On the other hand, in the approach of data collection from the secondary sources, the data will be acquired through lately published articles, journals, and other online sources (Kothari, 2011). Since, the primary method of data collection was identified as a highly time consuming method and difficult to be performed in this research study, secondary method of data collection was used in this study for deriving proper conclusions. Furthermore, the annual report and other online sources have been utilised for data collection in relevance with 20 real estate firms listed in the Chinese stock exchanges. In this regard, the official stock exchange of China, i.e. Shanghai Stock Exchange along with the company’s annual report and financial data has been collected. Besides, the financial position of this company has been evaluated from the period of 2003 to 2013. Apparently, the key reason for utilising the secondary sources of data collection is that in various secondary sources, greater access to reliable information was found that was considered valuable to obtain consistent insights over the performance of the companies. Data Analysis Data analysis plays an important role in quantifying the collected data related to the research study referring to the manner in which, relevant data as well as all the necessary information will be quantified to ascertain valid results in the study. Conceptually, qualitative, quantitative approaches or mixed approach, i.e. the combination of both qualitative and quantitative. This study was conducted based on the quantitative research method, as it is possible to identify the outcomes in a statistical manner more accurately. Besides, in this research study, the data, collected and gathered with the means of secondary sources, were analysed using statistical tools. In this study, reason behind using quantitative approach is that it allows the hypotheses developed to be properly analyzed through acceptance or rejection of assumptions that capital structure has direct impacts over the financial position of the companies included in the sample. The treatment of data collected through annual reports and other online sources depended on the application of correlation and regression to reach a suitable conclusion. In this regard, the hypothesis was drawn to validate the dependability of financial performance in respect of capital structure of the businesses. Furthermore, in relation to the above stated aspect, the below hypothesis has been formed: H0: Financial performance of the business is dependent over their capital structure H1: Financial performance of the business is not dependent over their capital structure Furthermore, it can be affirmed that using the statistical tools and diagrams has significantly assisted in determining if there is any impact of capital structure over the financial performance (Borrego & et. al., 2009). Limitation The study has been conducted using the quantitative method in order to determine the objective of the study, which increase the complexity in aligning the various statistical tools in quantifying the data. Moreover, another major limitation of the study is that this research study only provides a limited amount of knowledge regarding the impact of capital structure in the financial performance, as the study taken into concern only involve 20 real estate firms listed in the Chinese stock exchanges. On the other hand, systematic as well as the predetermined timeline for conducting the entire study also limits the scope of this research study. References Bergh, D. D. & Ketchen, D. J., 2009. Research Methodology in Strategy and Management, Volume 5. Emerald Group Publishing. Borrego, M. & et. al., 2009. Quantitative, Qualitative, and Mixed Research Methods in Engineering Education. Journal of Engineering Education, pp. 53-66. Jebreen, I., 2012. Using Inductive Approach as Research Strategy in Requirements Engineering. International Journal of Computer and Information Technology, Vol. 1, No. 2, pp. 162-173. Kothari, C, R., 2011. Research Methodology: Methods and Techniques. India: New Age International. Kelliher, F., 2005. Interpretivism and the Pursuit of Research Legitimisation: An Integrated Approach to Single Case Design. The Electronic Journal of Business Research Methodology Vol. 3, No. 2, pp. 123-132. Read More