Chapter 3

Research Methodology

3.1 A Brief Overview

This chapter basically describes the objectives of study. It also focuses on how study has been
conducted, the research design used for the study, methods of selecting and approaching the
samples, sources used for the collection of data. It also describes hypothesis used to identify the
relationship between variables and tests applied with the help of statistical tools. Five research
objectives were identified from the research gap obtained from literature review. They are as
follow

3.2 Objectives of the Study

 To assess the financial literacy among residents of Gujarat.

 To study and to analyze the awareness of Personal Financial Planning among residents
of Gujarat.
 To study and to analyze the attitude regarding Personal Financial Planning among
residents of Gujarat.
 To identify the factors influencing personal financial planning behavior.
 To examine the need of Financial Planner by investors.

3.3 Research Questions

 What is the level of financial literacy of residents of Gujarat State?

 Is there any impact of demographic variables on financial literacy of the respondents?
  Are respondents aware about different Investment avenues available for Personal
Financial Planning (PFP)?
 Do respondents have positive attitude towards PFP?
 Is there any impact of demographic variables on attitude towards PFP?
 Is there any association between financial literacy and attitude towards PFP?
 Which are the factors influencing PFP?

3.4 Research Hypotheses

H01: There is no significant association between Age and financial literacy of the respondents.

H02: There is no significant association between Gender and financial literacy of the respondents.

H03: There is no significant association between Education and financial literacy of the
respondents.

H04: There is no significant association between Experience and financial literacy of the
respondents.

H05: There is no significant association between Job Type and financial literacy of the
respondents.

H06: There is no significant association between Income and financial literacy of the respondents.

H07: There is no significant association between Marital Status and financial literacy of the
respondents.

H08: There is no significant association between Location and financial literacy of the
respondents.

Ho9: Awareness of different Investment avenues does not differ significantly with respect to
gender of the respondents.

H010: Awareness of different Investment avenues does not differ significantly with respect to Age
of the respondents.
H011: Awareness of different Investment avenues does not differ significantly with respect to
Education of the respondents.

H012: Awareness of different Investment avenues does not differ significantly with respect to Job
Type of the respondents.

H013: Awareness of different Investment avenues does not differ significantly with respect to
Experience of the respondents.

H014: Awareness of different Investment avenues does not differ significantly with respect to
Income of the respondents.

H015: Awareness of different Investment avenues does not differ significantly with respect to
Marital Status of the respondents.

H016: Awareness of different Investment avenues does not differ significantly with respect to
Location of the respondents.

H017: Attitude towards PFP does not differ significantly with respect to gender of the
respondents.
H018: Attitude towards PFP does not differ significantly with respect to Location of the
respondents.
H019: Attitude towards PFP does not differ significantly with respect to Age of the respondents.

H020: Attitude towards PFP does not differ significantly with respect to Education of the
respondents.

H021: Attitude towards PFP does not differ significantly with respect to Job Type of the
respondents.

H022: Attitude towards PFP does not differ significantly with respect to Experience of the
respondents.

H023: Attitude towards PFP does not differ significantly with respect to Income of the
respondents.
H024: Attitude towards PFP does not differ significantly with respect to Marital Status of the
respondents.

H025: Awareness of different Investment Avenues does not differ significantly with respect to
Financial Literacy of the respondents.

3.5 Scope of the Study

Study is designed to find awareness and attitude of investors for Personal Financial Planning.
Study also tries to identify factors influencing Personal Financial Planning for investors. To
conduct the study, a sample of 600 respondents has been chosen from four major cities from the
State of Gujarat. These are: Ahmedabad, Baroda, Rajkot and Surat. Scope of the study was
limited to Urban Salaried Employees of the State of Gujarat.

3.6 Research Design

(Parahoo, 2006) describes a research design as “a plan that describes how, when and where data
are to be collected and analyzed”. It basically shows how study will be conducted to fulfill the
defined objectives. Malhotra and Dash ( 2009) states that there are major two ways in which
research design is identified, Exploratory Research and Descriptive Research. Exploratory
research is useful when researcher doesn‟t have enough idea about how to proceed with the
research problem. If any formal research methods or protocol are not employed in particular
area then researcher may use Exploratory Research Design. Descriptive Research helps to
identify characteristics of groups or individuals. The major purpose of descriptive research is
description of the state of affairs as it exists at present.
( C R Kothari, 2004)
Descriptive research is gathering of information about prevailing conditions or situations for the
purpose of description and interpretation. This type of research method is not simply amassing
and tabulating facts but includes proper analyses, interpretation, comparisons, identification of
trends and relationships. (Dr. Y.P. Aggarwal, 2008)

Research Design Selected

For purpose of fulfilling the objectives defined earlier Descriptive Research Design was most
suitable. Hence it has been adopted for conducting study.
3.7 Sample Design

A sample design is the roadmap or framework which serves as the basis for selecting sample for
survey. It will include Sampling Unit, Sampling Technique and Sample Size.

3.7.1 Sampling unit

Main objective of the research is to assess level of financial literacy, awareness related to PFP in
Gujarat. Sampling Unit of the research is salaried employees of Government, Public Sector and
Private Sector.

3.7.2 Sampling Technique

Sampling technique can be broadly classified as Non Probability and Probability Sampling. Non
Probability technique of selecting sample has been used for the study. Samples were divided in
quota according to their job types: Public sector employees, private sector employees and
Government employees. Hence, Quota sampling technique has been used under non probability
method.

3.7.3 The Sample size

Sample size determination in empirical research is very important. Sample size should be
carefully selected so inference for entire population can be done from it. Aim of the study is to
find financial literacy, attitude and awareness of PFP of the respondents in Gujarat State.
Therefore, for the purpose of study, samples were selected from four Major cities of Gujarat:
Ahmedabad, Vadodara, Rajkot & Surat. From each City 150 salaried employees were selected.
Again they were divided into: 50 Government Employees, 50 Public Sector Employees and 50
Private Sector Employees. So Sample size for the present study is 600 Employees of Gujarat
state. Profile of the samples are tabulated in Table 3.1.
 TABLE 3. 1 – Sample Profile

150 Residents of Ahmedabad City 50 Govt. Employees+ 50 Public

Sector Employees + 50 Private
Sector Employees
150 Residents of Baroda City 50 Govt. Employees+ 50 Public
Sector Employees + 50 Private
Sector Employees
150 Residents of Rajkot City 50 Govt. Employees+ 50 Public
Sector Employees + 50 Private
Sector Employees
150 Residents of Surat City 50 Govt. Employees+ 50 Public
Sector Employees + 50 Private
Sector Employees

Source: Primary Data

3.8 Data Sources

3.8.1 Secondary Data

Secondary Data are the data already collected and published. For the study, secondary data were
collected from various Books, journals, thesis, periodicals, magazines, newspapers and
Websites.

3.8.2 Primary Data

Primary data are the data originated by researcher to meet certain objectives. For the study
primary data has been collected through structured questionnaire. Questionnaires were filled by
respondents through one to one approach.

3.9 Planning of Data Collection

For the purpose of Primary Data collection, survey technique has been adopted, in which close
ended questions are asked with the help of structured questionnaire. In this study, data were
collected from 600 salaried employees of Gujarat State by using Survey Method. Any salaried
employee can be a sampling unit for the survey. Planning was done to select employees from
diversified industries, so that the result may not get skewed. For the purpose of collecting data,
employees of different government bodies, Public Sector Units and Private Sector were
contacted with convenience sampling and with referrals methods. Government employees
selected for the study were employees of different municipal corporations, GIDC Class I & II
officers, Custom & Excise officers, Public School teachers. Public Sector employees were
selected from various PSUs like ONGC, Public Sector Banks etc. Data of Private Sector
employees were collected from different industries like Banking, IT, Heavy Engineering,
Education, FMCG etc.

3.10 Overview of Variables, Scaling Technique and Data collection

Instrument – Structured Questionnaire

A questionnaire is a written list of questions, the answers to which are recorded by respondents.
The respondents read the questions from the questionnaire, interpret what is expected and then
write down the answers.( Ranjit Kumar, 2011). Questionnaire may have questions which are
classified as Open ended and Closed ended questions. Open ended questions gives respondents‟
liberty to think and narrate answers in their own language of understanding. It may get difficult
to code and analyze the response given in open ended questionnaire. Closed ended questions,
because they provide “ready-made” categories within which respondents reply to the questions
asked by researcher, help to ensure that the information needed by the researcher is collected. In
this study, close ended questions were used to record the responses from the respondents. Data
collected through closed ended questions include Nominal Data, Categorical Data and data on
Likert Scale. For some sections, Three Point and Five Point Likert scale has been used by the
researcher. Five Point Likert scale is easy to construct and administer and respondents easily
understand how to use the particular scale.( Malhotra N., 2009)

3.10.1 Variables Identified for the study

Dependent Variables: Financial Literacy, Financial Attitude & Personal Financial Planning are
the dependent variables identified for the present research.
Independent Variables: From the literature review, demographic variables like; Age, Gender,
Education, Job Type, Work Experience, Income, Marital Status, Location have been identified
as independent variables, and these variables may have impact on financial literacy and financial
attitude. So the different demographic variables are independent variables of the study.

3.10.2 Overview of Questionnaire

Questionnaire was divided mainly in four sections. First section was designed to assess
Financial Literacy; Second section was designed to assess awareness of respondents regarding
various Investment Avenues. Third section was designed to analyze attitude of respondents
regarding Personal Financial Planning and Factors influencing the same. Fourth section of
questionnaire was pertaining to collection of Demographic profile of respondents.
To check the content validity of questionnaire, views of academicians and industry experts were
sought to check the validity of the content of the questionnaire. Their opinions & suggestions
were incorporated in the questionnaire.
To assess the financial literacy of the respondents, questions to assess knowledge for basic
financial terms were asked. Respondents had to choose one correct answers from four options
given to them. The first three questions were asked to assess basic financial literacy and the
remaining five questions were asked to assess advanced financial literacy. Questions asked were
adopted from the scale developed by Lusardi & Mitschell (2011).
Different study has shown that awareness related to different investment avenues are very low
among the Indian Investors. So present study aims at finding out awareness of different
investment avenues in Investors of Gujarat. To identify the awareness for some thirteen different
investment avenues, respondents were asked to assess their awareness on three point Likert
scale. Where „1 is unaware, 2 is moderately aware and 3 is completely aware‟. Next Section of
the questionnaire is for analyzing attitude towards Personal Financial Planning and Factors
influencing the same. Lai M. & Tan W. (2009) performed similar study in Malaysia to analyze
attitude and identify factors influencing PFP. Five point Scale developed by them was referred
and modified according to present Indian context. Attitude related to all the components of
Personal Financial Planning i.e. Money Management, Investments, Risk (Insurance)
Management, Tax Management, Retirement Planning, Estate Planning & Overall PFP was
assessed. For the purpose, statements related to all the components and Overall PFP were asked
and their agreeableness on Five Point Likert scale has been checked. Where „1 being strongly
disagree to 5 being Strongly Agree‟. Some negatively worded questions were also asked and
then inverted coding had been done for them. From various literature, factors which may
influence Personal Financial Planning were identified. Responses were taken on five point
Likert scale for respondents agreeableness of the factors influencing their financial planning
decisions.

3.10.3 Details of the Pilot Study

Pilot survey is in fact the replica and rehearsal of the main survey. Such a survey, being
conducted by experts, brings to the light the weaknesses (if any) of the questionnaires and also
of the survey techniques. From the experience gained in this way, improvement can be effected.
(C R Kothari, 2004)
Pilot study was conducted on 100 respondents of Ahmedabad City to check appropriateness of
the questions, content & sequence of the questions. Pilot Study was done using one to one
approach, so researcher can gauge the problems faced by respondents while filling it up. There
were some items in the questionnaire which were difficult to understand for a layman. Those
items were modified in a simple language so that respondents can easily understand the same.
After data collected for Pilot Study, data were analyzed to check whether questionnaire is
designed according to objectives and researcher is getting proper response or not. Analysis on
Pilot Data suggested that proper responses have been obtained. There after the data was
collected for the entire sample using the questionnaire.

3.10.4 Reliability Test

Reliability is consistency of measurement (Bollen, 1989), or stability of measurement over a

variety of conditions in which basically the same results should be obtained (Nunnally, 1975).
Cronbach Alpha is the measure to check reliability of the instrument. According to some
previous researches done in the area Alpha value above 0.7 is acceptable.
With the help of SPSS 20, Reliability test has been performed on Likert Scale items. For
attitudinal scale used in questionnaire, the Cronbach Alpha value obtained was 0.7. Therefore,
the research instrument used was considered as reliable.
3.11 Various Statistical Tests and Tools Used

Microsoft – Excel was used for data entry stage. Later that data was exported to SPSS. Microsoft
Excel was also used to find some descriptive analysis. Data collected on Likert Scale is an
ordinal data. Normality of ordinal data can‟t be checked, so for the present study only non-
parametric test have been used. SPSS 20 has been used to perform various tests like Chi-
Square, Mann Whitney U Test, Krushkal Wallis Test, Factor Analysis etc. AMOS is normally
used for building, validating and presenting a hypothesized model. For this study, AMOS 18
software was used for Confirmatory Factor Analysis and Structural Equation Modeling.