Research Methods in Accounting

and Finance (ACFN 3111)

Semester I
2024/25 AY
Part I Concepts of scientific research
• People have been struggling to understand/ know
their environment and the nature of the phenomena
it presents.
• In business, managers may be asking a number of
questions:
• Will the environment for long-term financing be better
two years from now?
• What kind of training is necessary for employees? or What
is the reason for the firm’s high employee turnover?
• What are the reasons for the decline in the firm’s financial
performance?
• What factors contribute to the poor tax compliance in Ethiopia
(non-business managers)?

• Research is one of the principal tools for answering these

practical questions.
• One of the means people use to achieve these ends (knowing
about their environment and nature of the phenomena it
presents) is research.
• Research: a human activity based on intellectual
applications in the investigation of phenomena/
matters.

• Research is a systematic process of collecting and

analysing information in order to increase our
understanding of the phenomenon about which we are
interested or concerned.
• Scientific research is the process of undertaking a systematic
study/ investigation to answer meaningful questions and
increase our understanding of a phenomenon;

• It is a systematic process of inquiry and investigation; and

increases (expands) the boundaries (frontiers) of knowledge.

• Research focuses on answering various questions and acquiring

new knowledge – solving a problem or tackling an issue
• Business research is the application of scientific methods in
searching for the truth about business phenomena.

• Literally, the term research (re-search) indicates patient study

and scientific investigation where the researcher takes another,
more careful look at the data to discover all that is known about
the subject

• Business research process includes problem definition,

searching for and collecting information, analyzing data, and
communicating the findings and their implications.

• This definition suggests that research information is not

unsystematically gathered.
Goal of scientific research
• The goal of scientific research is problem solving.

• Research focuses on answering various questions and acquiring

new knowledge – solving a problem or tackling an issue.
• Specifically, research intends to:
• review and synthesize existing knowledge
• investigate some existing situation or problem
• provide solutions to a problem
• explore and analyze more general issues
• construct or create a new procedure or system
• explain a new phenomenon
• generate new knowledge
• a combination of any of the above.
• by conducting research, researchers attempt to reduce the
complexity of problems, discover the relationship between
seemingly unrelated events, and ultimately improve the way we
live.
• For managers, the purpose of research is to provide knowledge
regarding the organization, the market, the economy, or other
area of uncertainty.

• The ultimate goal of research (for management purposes) is to

supply accurate information that reduces the uncertainty in
managerial decision making.
• Research facilitates effective management through supplying
inputs for various critical management decisions;

• To maintain the technical superiority of a product in the firm,

research may be undertaken based on information gathered from
technicians, experts in the area etc;

• To drive production costs down, research gathering input/

information from workers, engineers, finance, and accounting
becomes important

• With a marketing-oriented organization the majority of research

focuses on customers. Research addressing consumer desires,
beliefs, and attitudes becomes essential.
Characteristics of scientific research
• Although research projects vary in complexity and
duration, research typically has the following distinct
characteristics
• Research requires clear articulation of the goal
• The goal of scientific research is problem solving
• The ultimate goal of the research must be set forth clearly
• The statement of goal answers the question, “what
problem do you intend to solve?”
• Clear statement of goal is essential for the success of any
research undertaking;
Characteristics of scientific research (cont’d)
• Research is guided by specific research questions and or
hypotheses;
• After identifying and stating the problem/ subproblems and the related
research goal, the researcher usually forms one or more research
questions/ hypotheses.
• develop one or more tentative explanations/ questions.
• Research must be organized and undergo planning; or
research requires a specific plan for proceeding;
• research is not a blind activity/move into the unknown, with the hope
that the data necessary to answer the question and tackle the problem
will turn up.
• it is instead, a carefully planned work, a search and discover mission
explicitly outlined in advance.
Characteristics of scientific research (cont’d)
• Scientific research follows a set of protocols and established
procedures.
• Research requires understanding of the context and existing
information about the issue; considers various perspectives;
• research requires the collection and interpretation of data;
• collect data and organize them in meaningful ways so that
they can be interpreted.
• data demand interpretation.
• data, events and observations are, in themselves, only data,
events only, observations and nothing more.
• the significance of data depends on how the researcher
extracts meaning from (interprets) them.
Classifying research
• Research can be classified in various ways:
• outcome of the research – whether the expected outcome
is the solution to a particular (specific) problem or a more
general contribution to knowledge;
• Applied and basic (pure) research
• process of the research – the way in which data were
collected and analyzed; the type of data collected and
analyzed;
• Quantitative and qualitative

• purpose of the research – the reason why it was conducted

• Exploratory, descriptive, explanatory/causal
Types of research
• Basic (fundamental/ pure) and applied research
• Pure/basic/fundamental research: this may also be referred
to as theoretical research
• its primary objective is the advancement of knowledge and
theoretical understanding of the relation among variables;
• basically, concerned with the formulation of a theory or
original contribution to it
• mainly concerned with generalizations and with the
formulation of a theory.
• does NOT necessarily produce results of immediate practical
value
• aims at discovery of knowledge for the sake of knowledge
Types of research
• Applied research: aims at finding a solution for an
immediate problem facing a society or an industrial/business
organization;
• Designed to solve practical problems of the modern world
• Finding out the answer to a specific problem, e.g. does a
reward scheme improve employees’ efficiency in ABC
agency?’
• Not to acquire knowledge for knowledge's sake.
Applied and basic research (cont’d)
• Distinction between basic and applied research:
• Difficult to draw a clear boundary between these two types of
research
• Often believed that both should not be thought of as two
mutually exclusive categories
• Research often yields results that have both theoretical and
practical implications.
Quantitative and Qualitative Research
• Quantitative research is based on the measurement of
quantity or amount.
• It is applicable to phenomena that can be expressed in terms
of quantity (numbers).
• Qualitative research, on the other hand, is concerned with
qualitative phenomenon, i.e., phenomena that cannot be
numerically expressed (relating to or involving quality or
kind);
• Researchers may choose to collect qualitative data and
analyze the data using non-numerical methods of analysis.
Exploratory, descriptive, explanatory/
causal research
• Exploratory research is conducted to provide better general
understanding of phenomena when there are very few or no
previous studies.
• It can also be used to examine the feasibility of a more rigorous,
larger study later.
• The aim of this type of research is to look for patterns and
develop ideas rather than test propositions/ hypotheses.
Exploratory, descriptive, explanatory/
causal research (cont’d)
• Descriptive research is conducted to identify and describe the
detailed characteristics of phenomena.
• Descriptive research goes further than exploratory research
when examining a phenomenon
• Explanatory research is a continuation of descriptive research.
• The researcher goes beyond merely describing the
characteristics of phenomena to explaining the cause and effect
of the phenomenon under study.
• The aim is to understand phenomena by testing hypotheses and
discovering causal relationships between variables.
• Example, employees financial reward and service efficiency;
company size and staff turnover
The systematic process of research
• Whatever type of research or approach is adopted, there are
several fundamental stages in the research process that are
common to all scientifically based investigations.
• Research process consists of a series of actions or steps
necessary to effectively carry out the investigation;
• The following order concerning various steps provides a useful
procedural guideline regarding the research process:
• research topic and formulating the research problem;
• literature review;
• defining the broad research objective and hypotheses/
specific research questions;
• preparing the research design, which may include decisions
on various aspects of the research (sampling design,
instrument design etc.);
The systematic process of research (Cont’d)
• Execution of the project – actually implementing the research
design – developing the instrument, selecting respondents,
approaching the institutions where you source the data,
collecting the relevant data etc;
• collecting and analyzing data;
• Answering specific research questions and or hypotheses
testing- Assess if the data support or (not) the hypotheses
• Presenting the results and interpretation/ discussion (preparation
of the research report, i.e., formal write-up of the report
including conclusions reached).
The systematic process of research (Cont’d)
• The activities may overlap rather than following a strictly
prescribed sequence;
• Some of the activities in the subsequent steps may need to be
considered at the early stages;
• If subsequent procedures have not been taken into account in
the early stages, serious difficulties may arise which may even
prevent the completion of the study;
• the various steps involved in a research process are not
mutually exclusive; nor they are separate and distinct;
Part II: Formulation of research problems
and Hypotheses
• Select the topic and formulate the research problem:
• The first step in the research process is to determine the
general subject area that interests you and is relevant to your
programme of study and defining the research problem.

• Select a topic that interests you and/or of which you have

some knowledge.
Part II: Formulation of research problems
and Hypotheses (Cont’d)
• Research problem is an issue that a researcher intends to
undertake the research and tackle;
• A research problem is the specific problem or issue that is the focus of
the research.
• Research problems could be of an immediate and practical
value or they could be of theoretical nature.
• Note that a research topic is the general area of research
interest, a research problem is the particular problem or
issue that is the focus of the research;
▪ The world is filled with unanswered questions and
unresolved issues
▪ everywhere we look, we see things that cause us to wonder,
to speculate, to ask questions.
▪ An inquisitive mind is the beginning of research, as some
scholars say “Inquiring minds want to know”.
Part II: Formulation of research problems
and Hypotheses (Cont’d)
• The research problem involves searching the literature on
that topic;
• Some previous studies may indicate future research
directions/ areas;
• It might incorporate exploratory research to identify a
research problem or issue that is small enough to be
investigated

• Identify a business problem related to that topic by reading

previous studies and reflecting on current issues being
discussed in media, on campus or at work.
Part II: Formulation of research problems
and Hypotheses (Cont’d)
• Research paradigms/ worldview:
• Research paradigm is thinking/ view individuals have about
the nature of the world/ reality; and how knowledge is
developed

• A research paradigm is a philosophical framework that

guides how scientific research should be conducted.

• A paradigm is the basic set of belief system or worldview

that guides research action or an investigation;
Part II: Formulation of research problems
and Hypotheses (Cont’d)
• Research paradigms/ worldview:

• This worldview is the perspective, or thinking, or school of

thought, or set of shared beliefs, that informs the meaning or
interpretation of research data.

• The paradigm defines a researcher’s philosophical orientation

which has significant implications for every decision made in
the research process, including choice of methodology and
methods (reading assignment 1).
Part II: Formulation of research problems
and Hypotheses (Cont’d)
• Paradigms: Positivism
• Positivism relates to the philosophical stance of the natural
scientist and requires working with observable reality to produce
generalizations.
• The term positivism refers to the importance of what is ‘given’.
• It focuses on scientific method designed to yield pure data and
facts uninfluenced by human interpretation or bias;
• There are laws or theories that govern the world/ reality and these
need to be tested or verified and refined so that we can
understand the world.
• Is adopted by researchers who seek objectivity in their
explanation of social reality.
Part II: Formulation of research problems
and Hypotheses (Cont’d)
• Positivism (Cont’d)
• The knowledge that develops through a positivist lens is based
on careful observation and measurement of the objective reality;
• The positivist assumptions hold true more for quantitative
research than qualitative research.
• Research under positivists worldview tends to:
• Pursue an objective search for facts (objectivity);
• Use large samples
• Be concerned with theory/ hypothesis testing
• Produce precise, objective, quantitative data
• Allow results to be generalized from the sample to the
population;
Part II: Formulation of research problems
and Hypotheses (Cont’d)
• Interpretivism
• Interpretivism emphasizes that humans are different from
physical phenomena because they create meanings; and hence
cannot be studied in the same way as physical phenomena;

• Interpretivists study these meanings created by human beings;

• Interpretivism is underpinned by the belief that social reality is

not objective but highly subjective because it is shaped by our
perceptions.

• interpretivism provides an understanding of social reality

through subjective interpretation.
Part II: Formulation of research problems
and Hypotheses (Cont’d)
• Interpretivism (Cont’d)
• Positivism focuses on measuring social phenomena,
interpretivism focuses on exploring the complexity of social
phenomena with a view to gaining deep understanding;

• Interpretivism paradigm is related to qualitative research

approach
Part II: Formulation of research problems
and Hypotheses (Cont’d)
• Interpretivism (Cont’d)
• The interpretive paradigm tends to:
• Use small samples
• Studies the phenomenon while in a natural location/
setting
• Be concerned with generating theories
• Produce ‘rich’, subjective, qualitative data
• Emerging issues are taken into account
• Main limitations include:
• Findings cannot be generalized for a population of
interest;
• Subjective and cannot be replicated
Part II: Formulation of research problems
and Hypotheses (Cont’d)

• Research under positivism paradigm is any type of research

where the findings are derived from the statistical analysis of
quantitative data.

• Research under interpretive paradigm is any type of research

where the findings are derived from qualitative methods of
analysis, which are based on the interpretation of qualitative
data
Part II: Formulation of research problems
and Hypotheses (Cont’d)

• Quantitative and qualitative research approaches

• Often the distinction between qualitative and quantitative

research is framed in terms of using words (qualitative)
rather than numbers (quantitative) or using closed ended
questions (quantitative) rather than open ended questions
(qualitative) in data collection instruments.
Part II: Formulation of research problems
and Hypotheses (Cont’d)
• Quantitative research approach
• is one in which the investigator primarily uses positivist
claims for developing knowledge;
• quantitative research employs a review of the existing
literature/ knowledge to identify the relevant theories and
hypotheses to be tested;
• in this approach, the research problem is translated to specific
variables and hypotheses.
Part II: Formulation of research problems
and Hypotheses (Cont’d)
• Quantitative research approach (Cont’d)
• researchers tend to assume that there is a cause-and-effect
relationship between known variables;
• employs strategies of inquiry such as surveys and experiment;
• Survey design – studying a population using a sample (subset
of the population)
• collects information using preset standardised/structured
instruments (closed ended questions) that can generate relevant
statistical data.
• tries to test the theoretically established relationship between
variables using sample data with the intention of statistically
generalising for the population under investigation.
Part II: Formulation of research problems
and Hypotheses (Cont’d)
• Qualitative research
• Based on interpretivism/ constructivism worldview
• Subjective and rich data to deeply understand the
phenomenon under study;
• Intends to develop theories (not to test theory/hypothesis);
• Results cannot be generalized to the population under
consideration (the findings apply to the cases
investigated);
• Uses open ended questions in gathering data; emerging in
nature;
• Indepth interviews, focus group discussions, observations
etc. could be means of data acquisition
• Qualitative information could be analyzed using some
themes;
Part II: Formulation of research problems
and Hypotheses (Cont’d)
• Mixed methods research approach
• Based on pragmatism paradigm
• Has both qualitative and quantitative elements
• It addresses the limitations of the two research approaches;
• The mixing could be sequential or concurrent;
• Choosing from these research approaches:
• The nature of the research problem, objective;
• The researcher’s experiences (among others)
Part II: Formulation of research problems
and Hypotheses (Cont’d)
• Quantitative research – specific research questions and or
hypotheses may be used;
• If there are existing theories in the literature about the
relationship between the variables of interest, hypothesis will
be used;
• If there are no existing theories about the relationship
between variables of interest, research questions will be used;
• Research questions: inquire about the relationships among
variables that the investigator seeks to know.
• A research question poses a relationship between two or
more variables but phrases the relationship as a question;
Part II: Formulation of research problems
and Hypotheses (Cont’d)
• A hypothesis is an idea or proposition that is developed from
the theory, which you can test using statistical methods
(using empirical evidence, which is data collected about each
variable based on observation or experience)

• Hypotheses are predictions that researchers make about the

expected relationship between known variables.

• Hypotheses are tentative statements/solutions or explanations

of the formulated problem.
Part II: Formulation of research problems
and Hypotheses (Cont’d)
• The tentative statement concerning the relationship between
the variables of interest;
• A variable is a characteristic of a phenomenon that can be
observed or measured.

• Hypothesis often takes the form of a statement of how

changes in the value of one variable will affect the value of
the other variable;

• In research, hypotheses are rarely proved or disproved;

instead they are either supported or not supported by the data.
Part II: Formulation of research problems
and Hypotheses (Cont’d)
• two forms of hypotheses: null and alternative
• A null hypothesis (reading assignment 2)
• Alternative hypothesis – the investigator makes prediction
about the expected outcome (on the relationship between the
variables under consideration), based on prior literature and
studies on the topic that suggest a potential outcome.
• An alternative hypothesis may be stated in a directional or
non-directional form.
• A directional hypothesis statement indicates the expected
direction of the relationship
• Non-directional hypothesis does not specify the direction of
relations between the variables under consideration;
Part II: Formulation of research problems
and Hypotheses (Cont’d)
• Examples:
• There is relation between business financial performance and
liquidity (nondirectional);
• Liquidity is positively related with banks’ financial
performance (directional)
• Tax compliance increases with tax knowledge (directional);
• There is relation between tax compliance and tax knowledge
(nondirectional)
• Does taxpayers’ knowledge about the tax system affect their
compliance decision? (this may be used if there are no
theories / past studies showing the expected relationship
between tax knowledge and tax compliance)
Part II: Formulation of research problems
and Hypotheses (Cont’d)
• Characteristics of hypothesis include:
• Hypothesis should be clear;
• Hypothesis should be capable of being tested;
• Hypothesis should be limited in scope and must be specific;
• Researchers must remember that narrower hypotheses are generally
more testable;
• Hypothesis should state relationship between variables of
interest;
• As much as possible, hypothesis should be stated in simple terms
so that the same is easily understandable by all concerned;
• Hypothesis should be based on the existing body of knowledge
(existing theories/studies);
• Hypothesis should be testable within a reasonable time;