Darun Final

8/7/2019 Darun Final

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The Determinants of Working CapitalManagement Practices: A Malaysian

Perspective

Research Proposal

By:Mohd Ridzuan Darun

Student ID: 1075703Accounting Group

Commerce DivisionLincoln University

Supervisor:Dr. Jamal Roudaki

Senior Lecturer

Associate Supervisor:Jack RadfordSenior Lecturer

25 th 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. Eventhough a number of studies about WCM were undertaken in many countries aroundthe world, especially in Western countries, the understanding about how to manageworking capital is not explicit. To date there has been no study examining theMalaysian context. Prior research in this area has focused on two approaches 1)surveys seeking to examine the relationship between WCM and corporateperformance, and 2) the development of optimisation models to improve WCMperformance. In the event of changes in industry context, it is argued that the failureof WCM research to reflect the characteristics and challenges of contemporaryorganizational settings has led to a loss of relevance and gives rise to the need for aconceptual framework explaining current WCM practices. This study is intended tofirst 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, withparticipating organizations selected from the main board at the Bursa Malaysia. Keyinformants will be chosen to ensure that the collection of data illustrates the patternsof WCM practices in organizational settings. The research questions are designed toexplore the diversity of decision-making processes related to WCM practices. Thisstudy will use semi-structured interviews, and secondary evidence to interpret WCMpractices. Qualitative data analysis will be used to analyze the evidence.

Limitations and Delimitation The main limitations of this study will be theconstraints due to limited time and financial support. The researcher is required toallocate a long period of time on actual sites to investigate and understand the WCMpractices. However, a coherent system in collecting and analyzing data shouldminimize the risks of research process.

Significant of Study This study will contribute to the body of knowledge byidentifying how Malaysian companies manage their working capital. This study willprovide a general framework to researchers, policy makers, professionals andmanagers to guide future researches, reappraise current business practices, andprovide basic guidelines for policy makers in rapid changing of business environmentof 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 ..................................................................................24Appendix 2: Research Budget .....................................................................................25


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The Determinants of Working Capital ManagementPractices: 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 Malaysias, 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; Garca-Teruel &

Martnez-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

companys 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 companys

ability to respond to demand is largely dependent on how efficient the company

manages inventories and how committed its suppliers are to support a companys

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 managers 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 companys profitability, by holding cost and risk

of unsaleable products.

Table 1: The Integration of WCMResearch Categories ReferencesIntegrate Receivables andInventory

(William Beranek, 1963); (Shapiro, 1973);(Bierman, Chopra, & Thomas, 1975); (Sartoriset 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 WCM1. External Factors What may affect WCM References:

i. Politics (Ketchum, 1942), (Ketchum, 1943),(Carey, 1949), (Carey, 1949)

ii. Business and economicenvironment

(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. ManagementSystem/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), (Garca-Teruel & Martnez-Solano, 2007)

ii. Organizational behaviour (Loeser, 1988), (Krishna, Dmitri, &Victor, 1993)

iii. Investment policy (Seidner, 1990)iv. Management financial

capability (knowledge)(McMahon & Holmes, 1991), (AbdulRahman & 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 financialcapability (knowledge)

(Cheatham & Cheatham, 1993),(Hossain & Akon, 1997)

iii. Credit policy/Collectionmanagement

(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 StudiesThis 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;

UsingLiteratureReview todevelopResearchDirections

QualitativeDataAnalysis and

Discussion

Multiple CaseStudies

In-deptinterviews

ObservationsDocuments

DevelopingConceptualFramework

RefineResearchInstrumentsusing FocusGroupDiscussion

ResearchSequence 1

Stage 1 Stage 3Stage 2 Final Output

ResearchSequence 2

UsingLiteratureReview toidentifywhatinfluencesWCMdecision

UnderstandingMalaysianEnvironment Legislation Policies Studies ReportsLiteratures


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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 SelectionIn 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 researchers knowledge of local business environment. The


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researchers 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

ResearchQuestions andObjectives

Screen CaseStudy

Nominations

Prepare for DataCollection

Collect EvidenceCase 1

Collect EvidenceCase 2

Collect EvidenceCase x

Analyse the CaseStudy Evidence& Report Case 1

Analyse the CaseStudy Evidence& Report Case 2

Analyse the CaseStudy Evidence& Report Case x

Source: Yin (2003, p. 50)

Write multiplecase studies

MakeImplications of the research

DevelopConceptualFramework

Analyse MultipleCases

Define and Design Prepare, Collect & Analyse Analyse & Conclude


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19

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


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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 2 nd July 2007 and the completion of the project will be on the 31 st Aug 2010. The act

as follows:

Activities/Time Line 707 907 1207 308 608 908 1208 309 609 909 120

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 BudgetDescription Cost (NZD)

1 Printing and Photocopying2 NVivo8 Training (25 th 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)

6Multiple Case Studies/Understanding Malaysian LocalSetting (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 additionalcharges occurred from the conference.