ACFN 3111-

Research Methods in Accounting & Finance

Chapter II
Formulation of the Research problem
Contents of the lecture

2.1 What is Research Problem

2.2 Hypothesis Formulation
2.3 Process of Testing Hypothesis
Introduction
 Previous discussions provided general perspectives and
understanding about research.
 Definition of research,
 Its role and purpose in the quest for knowledge
generation and understanding,
 The scientific method and ways of reasoning,
 Ethical considerations, etc.

 But, they did not provide guidance on how to do the

research.
 Some of the critical elements of the research process are
discussed in this part.
 The research process
 Research can be broken down into a series of steps that are
interrelated and are sometimes revisited in an iterative
fashion.

 In other words, the research task is usually a sequential

process involving several clearly defined steps.

 i.e., from the formulation of a general idea to actual data

collection, and interpretation of the results and
conclusions.
 The research process
 There are some conventionally acceptable standards that
should be achieved in order to gain credibility.

 Some researchers portray the steps in a linear form while

others put them in a cyclical form.

 Begin but never ending/Begin and end

The research process
 The conventional steps involved in the research process
are:
 Selecting a research topic
 formulating the research problem with focus on the
main research questions
 Literature survey
 Preparing the research design and determining the
sample design and sample size
 Collecting and analyzing the data
 Generalizations and interpretations of results
 Preparing the report and presentation of the results
The research process
 In short: once a research idea is identified the research
process involves:

 Review of literature– new research is based on a

huge legacy of previous work.

 Understanding the nature of data –a good

understanding of the nature of data is required in
order to be able to collect and analyze it.
The research process
 Sampling – it is rarely possible to include every body or
everything in your research.
 How you select the sample is crucial to the
credibility of your research.

 Collecting data– a wide choice of collection methods

are available from which you can choose the methods
which are appropriate for particular types of
investigation.
The research process
 Analyzing data– what you do with the data after you
have collected it depends on the analytical methods you
adopt.

 Writing up – and presenting your research and findings

in a way that convinces others.

 Ethics–When doing research you need to take into

account all ethical issues to make sure that you do no
harm.
The research process
 The eight-step model for carrying out research
 PHASE I DECIDING WHAT TO RESEARCH
 Step I Formulating a research problem
 PHASE II PLANNING A RESEARCH STUDY
 Step II Conceptualising a research design
 Step III Constructing an instrument for data collection
 Step IV Selecting a sample
 Step V Writing a research proposal
 PHASE III CONDUCTING A RESEARCH STUDY
 Step VI Collecting data
 Step VII Processing and displaying data
 Step VIII Writing a research report
Defining the research problem and objectives
 Steps in formulating a research problem
 If you do not know what specific research topic, idea, questions or
issue you want to research (which is not uncommon among
students), first go through the following steps:
 Step 1 Identify a broad field or subject area of interest to you.
 Step 2 Dissect the broad area into subareas.
 Step 3 Select what is of most interest to you.
 Step 4 Raise research questions.
 Step 5 Formulate objectives.
 Step 6 Assess your objectives.
 Step 7 Double-check.
Defining the research problem and objectives
 In business research problem-definition process involves several
interrelated steps:
1. Understand the business situation—identify key symptoms
2. Identify key problem(s) from symptoms
3. Write managerial decision statement and corresponding
research objectives
4. Determine the unit of analysis (i.e. source of data: individuals,
households, organizations, geographical areas, or objects such
as products, advertisements)
5. Determine the relevant variables
6. Write research questions and/or research hypotheses
Identification of a Research
Topic/Problem
 The first step in the research process is to find an idea
for a research study.
 i.e. formulating and clarifying the research topic is
the starting point of your research project

 Capture the essence of the research in a “nutshell”

 Meaning deciding on the topic of the research and

finding a question which may be,
 an unresolved controversy, or
 simply a gap in knowledge within the chosen subject.
Identification of a Research
Topic/Problem
 This is probably the most difficult, and yet the most
important, part of your research project.

 Without being clear about what you are going to

research it is difficult to plan how you are going to
research it.

 Once you have done this you will need to turn the
idea into research questions and objectives and to
write the research proposal for your project
Identification of a Research
Topic/Problem
 Identifying a research topic typically involves two steps:

 First, selecting a general topic area,

 The general topic area is simply the starting point
that eventually will evolve into a very specific
research question.

 You need to find an interest in a broad subject area

(problem area).
Identification of a Research
Topic/Problem
 Second, reviewing the literature in that general area to
find a specific research questions.
 This process will enable you to:
 Narrow the idea to a plausible topic.
 Question the topic from several points of view, and
 Define a rationale for your project.
 As you read through the research literature,
 you will become familiar with the current state of
knowledge and can determine what questions are still
unanswered.
Identification of a Research
Topic/Problem
 Generally, there are three types of research titles:

 Indicative title:
 they state the subject of the research rather than
the expected outcomes.

 Example: The role of agricultural credit in

alleviating poverty in a low-potential areas of
Ethiopia.
Identification of a Research
Topic/Problem
 Hanging titles have two parts: a general first part
followed by a more specific second part.

 Example: ‘Alleviation of poverty in low-potential

areas of Ethiopia: the impact of agricultural credit’.
 Question-type titles are used less commonly than
indicative and hanging titles.

 Example: ‘Does agricultural credit alleviate poverty

in low-potential areas of Ethiopia?’
Identification of a Research
Topic/Problem

Where do research topics come from?

Identification of a Research
Topic/Problem
 There is no set formula for the identification of a topic
of research.

 In principle a topic must spring from the researcher’s

mind like a plant springs from its own seed

 i.e. it should be generated by the researcher

Identification of a Research
Topic/Problem
 Ideas for a research topic can come from a variety of sources
including: everyday experiences, books, journal articles, or
class work.

 The best way to identify a topic is to draw up a shortlist of

possible topics that have emerged from your reading or from
your own experience that look potentially interesting.

 A general area of interest or aspect of a subject matter

(accounting, finance, industry, social sector, etc.) may have to
be identified at first.
Identification of a Research
Topic/Problem
 The best guide is to conduct research on something that interest
you.
 Accounting software or systems
 Accountants role
 Risk and risk management
 Social and environmental accounting
 Japanese and lean manufacturing accounting
 MA theories and practices
 Strategic management accounting
 Capital budgeting
 Budgetary control
 Management control systems
 Cost management
 Performance measurement and rewards, etc.
Identification of a Research
Topic/Problem
A) Generated by the researcher.
 Own professional experience is the most important
source of a research problem.
 choose a topic in which if possible, already have
some academic knowledge.
 For instance, some researchers are directly engaged in
program implementation and come up with a topic based
on what they see is happening.
 attending conferences, seminars, and listening to
professional speakers, etc. are all helpful in
identifying research problems.
Identification of a Research
Topic/Problem
B) Examining the literature
 Examining the theoretical or empirical literature in your
specific field.
 Published articles are excellent sources of ideas. They
help to…
 Explore findings discovered in previous research.
 Identify suggestions an author gives for further
research at the end of an article.
 Extend an existing explanation or theory to a new
topic or setting.
 Challenge findings or attempt to refute a relationship.
Identification of a Research
Topic/Problem
C) Provided by a client

 Requests For Proposals (RFPs) are published by

government agencies, NGOs and some companies.
 They describes the problem that needs to be
addressed,
 the contexts in which it operates,
 the approach they would like you to take, and
 the amount they would be willing to pay for such
research - they are virtually handing the researcher
an idea.
Identification of a Research
Topic/Problem
 But, if the topic is something in which you are not
interested you will have to weigh the advantage against
the disadvantage of a potential lack of personal
motivation.

d) Technological and Social Changes

New developments bring forth new development challenges
for research.
E) Looking at Past Project Titles
Scanning your university’s list of past project titles for
anything that captures your imagination
Identification of a Research
Topic/Problem
 F) Scanning the Media
 Keeping up to date with items in the news can be a
rich source of ideas.
 The stories which occur everyday in the newspapers

 G) Discussion and Brainstorming

 Colleagues, friends, practitioners and university
tutors are all good sources of possible project ideas.
Identification of a Research
Topic/Problem
 The most fundamental rule of good research is to
investigate questions that sincerely interest you.

 i.e. research which a researcher honestly enjoys

even if he/she encounters problems frustrating
or discouraging.

 The research process can be a long term, messy and

demanding enterprise.
Identification of a Research
Topic/Problem
 Without motivation, it is very easy for a researcher to
get tired or bored and give up before the research is
completed.

 Subject which is overdone, should be avoided by the

average researcher since it will be difficult to throw any
new light in such cases for the average researcher.
Identification of a Research
Topic/Problem
 So, choose a worthwhile issue which is
 New
 Catchy
 Focused
 Non-obvious conclusion
 You can get the data
 Doable
Identification of a Research
Topic/Problem
 Remember: Keep Track of References
 Any literature cited must be listed properly in a
References section.

 Record the full references as you go!

 Author, title, journal name, volume and date,
page numbers, book publisher & location, date

 Always record page numbers.

 Give page numbers for all information, not just
quotations.
 Identification of a Research
Topic/Problem
 Examples of topics, research problems and related
research questions
Example 1 Example 2
Topic Employee retention Finance
Research Effect of new career-break Access to finance for small
problem scheme in Firm A on the firms
recruitment and retention of
skilled staff
Research How has the new career- How do small firms meet
question break scheme contributed to their needs for finance (in a
employment in Firm A? particular industry,
geographical location, time
period, etc.)? 33
Identification of a Research Topic:
Examples of research problems
 Communication methods – The effectiveness of public
service announcements for communicating with students
 Corporate governance – How corporate governance can
be extended to employee communications
 Environmental issues in manufacturing – Influence of
‘green’ factors on supplier selection in the manufacturing
sector
 Financial accounting in the National Health Service – The
use of financial accounting by doctors in general practice
 Financial reporting – The most effective way of
communicating financial information to stakeholders
 Gender issues in employment – The effect of career-
break schemes on the recruitment and retention of
skilled staff

34
Attributes of a good research
topic/problem
 Your research topic must be something you are capable
of undertaking it and one that excites your imagination.

 Capability implies that:

 you feel comfortable that you can develop, the skills
that will be required to do the research.
Attributes of a good research
topic/problem
 Capability also means you must be reasonably certain of
gaining access to any data you might need to collect.

 Many people start with ideas where access to data will

prove difficult.
 It is also important that the issues within the research are
capable of being linked to theory.
 As a consequence you will need to have a knowledge of
the literature and to undertake further reading as part
of defining your research questions and objectives.
 Attributes of a good research
topic/problem
 Your ability to find the financial and time resources to
undertake research on the topic will also affect your capability.
 Some topics are unlikely to be possible to complete in the
time allowed by your course of study.
 For example: topics that are likely to require you to
travel widely or need expensive equipment should be
disregarded unless financial resources permit.
 Attributes of a good research
topic/problem
 Another attribute of a good topic is having clearly defined
research questions and objectives.
 These will enable you to assess the extent to which your
research is likely to provide fresh insights into the topic.

 Finally, it is important to consider your career goals.

 If you wish to become an expert in a particular subject area

or industry sector, it is sensible to use the opportunity to
develop this expertise.
 Attributes…research topic/problem:
Summary
 Capability: is it feasible?
 Do you have, or can you develop within the project time frame,
the necessary research skills to undertake the topic?
 Is the research topic achievable within the available time?
 Will the project still be current when you finish your project?
 Is the research topic achievable within the financial resources
that are likely to be available?
 Are you reasonably certain of being able to gain access to data
you are likely to require for this topic?
Attributes…research topic/problem:
Summary
 Appropriateness: is it worthwhile?
 Does the topic fit the specifications and meet the standards
set by the examining institution?
 Does your research topic contain issues that have a clear
link to theory?
 Are you able to state your research question(s) and
objectives clearly?
 Will your proposed research be able to provide fresh
insights into this topic?
 Are the findings for this research topic likely to be
symmetrical: that is, of similar value whatever the
outcome?
Attributes…research topic/problem:
Summary
 Fulfilment

 Does the research topic really interest and motivate you?

 Will the research topic help towards the achievement of

your future aspirations or career goals?
 Research Questions-Turning research ideas
into Research Questions
 The problem of the research, which had been stated in general terms, is now
made specific through Research Questions.
 A research question /s
 is a question that provides an explicit statement of what it is the researcher
wants to know about.
 force you to consider the issue of what it is you want to find out about
precisely and rigorously.
 express the research objectives in terms of questions that can be addressed by
research.
 asking a research question serves to narrow your focus on the topic of
interest.
Research Questions-Turning research ideas
into Research Questions
 Research question/s…
 stem from the aims, purposes and objectives of the research.
 turn a general purpose or aim into specific questions to which
specific, data-driven, concrete answers can be given.
 is the process of operationalization of the aims and
purposes into research questions.
 the answers to the research questions can provide some of the
‘deliverables’.
 must be aligned with the aims and objectives of the research.
Research Questions-Turning research
ideas into Research Questions
 In terms of specificity, a research question rests in the
middle between a theory, which is very broad, and a
hypothesis, which is very precise.
 Theories are general statements and research
questions are mid- level statements, hypotheses are
specific predictions about what will happen according to
the theory.
Research Questions-Turning research
ideas into Research Questions
 Developing research questions is a matter of narrowing
down and focusing more precisely on what it is that you
want to know about.

 If you do not specify clear research questions,

 there is a great risk that your research will be
unfocused,
 that you will be unsure about what your research is
about, and
 unsure about what data you are collecting data for, etc.
 Research Questions-Turning research
ideas into Research Questions
 So, research questions will:
 guide your literature search;
 guide your decisions about the kind of research design to
employ;
 guide your decisions about what data to collect and from
whom;
 guide your analysis of your data;
 stop you from going off in unnecessary directions; and
 provide your readers with a clearer sense of what your
research is about
Research Questions-Turning research
ideas into Research Questions
 Many studies may have:
 one research question that asks for descriptive data,
together with
 another that asks for explanations (causal – why – or
‘how’ questions), together with
 a third that asks for the implications/
recommendations that derive from the answers to
the preceding two research questions, moving from
description to analysis/explanation to
evaluation/implications/recommendations, i.e. three
research questions.
Research Questions-Turning research
ideas into Research Questions
 Or the research questions may comprise:

o a question that asks for descriptive data (what, who, where, when); followed
by
o a question that requires comparisons, differences, relations to be drawn;
followed by
o a question that asks ‘so what?’ (implications and recommendations).
Defining the research problem and objectives
 What is a research problem/gap?
 refers to any difficulty, which a researcher experiences in the
context of either a theoretical or practical situation and wants to
obtain a solution for.
 is the first step and the foundation or the heart of every research
process.
 occurs when there is a difference between the current state of
conditions and a more preferable set of conditions.
Defining the research problem and objectives
 Statement of the Problem
 Problem definition (problem statement) is a clear and
precise statement of the question or issue to be investigated.
 Problem statement is:
 a clear statement about an area of concern,
 a condition to be improved upon,
 a difficulty to be eliminated, or
 a troubling question that exists in scholarly literature, in
theory, or within existing practice.
Defining the research problem and objectives
 Defining a problem clearly:
 involves the task of laying down the boundaries within
which a researcher shall study the problem.
 is more important than its solution, i.e. a problem clearly
defined is a problem half solved.
 will help to find answers to questions like:
 What data are to be collected?
 What characteristics of data are relevant and need to
be studied?
 What relations are to be explored?
 What techniques are to be used for the purpose?
Defining the research problem and objectives

 Hence, in the definition of the problem you are required

to describe:
 the background of the study,
 its theoretical basis and the underlying assumption,
 the specific and workable questions, and
 an explanation of why it is important or significant,
and what advantage (i.e. to society or to other
researchers) the research may deliver.
Defining the research problem and objectives

 The problem statement should make a convincing

argument that there is insufficient knowledge available
to explain the problem.
 The problem definition should also provide a brief
overview of the literature and research done in the
field related to the problem and of the gaps that the
proposed research intends to fill.
Defining the research problem and objectives

 The problem statement may focus on:

 Identifying a Gap: A research gap is an area where no
or little research has been carried out.
 Raising a question: The research problem is defined
by asking a question to which the answer is
unknown, and which you will explore in your
research.
Defining the research problem and objectives
 Continuing a previously developed line of enquiry.
Building on work already done, but taking it further (by
using a new sample, extending the area studied, taking
more factors into consideration, taking fewer factors
into consideration, etc.).
 or

 Counter-claiming: here a conflicting claim, theory or

method is put forward.
The research objectives
Objectives of the study:
 is the researcher’s version of the research problem
 is the step of rephrasing the problem into operational or
analytical terms, i.e. to put the problem in as specific
terms as possible.
 are generally taken as evidence of the researcher’s clear
sense of purpose and direction.
The research objectives
Objectives of the study:…
 These research objectives are the deliverables of the
research project.
 Should be written as a statement regarding an action to
undertake, using the word “to” (e.g. “to discover…,” “to
determine…,” “to ascertain…,” “to establish…” etc.)
The research objectives
 Objectives should be listed under two headings:
 Main/general objectives;
 sub objectives.
 The general objective
 provides a short statement of the specific goals pursued by
the research.
 Using the general focus of your research question you will
develop a set of research objectives.
 is the purpose of the research, expressed in measurable
terms; the definition of what the research should accomplish.
The research objectives
 The specific objectives
 are the objectives against which the success of the whole
research will be judged.
 are the basis for the research design.
 list of the specific activities to be performed.
 are operational and indicate the type of knowledge to be
produced, audiences to be reached, etc.
The research objectives
The research objectives
 Example:
 General objective/problem: To explain the determinants of
audit fees in the public and private sectors of Ethiopia.
 Specific objective/Sub-problem 1. To provide evidence
on the determinants of audit fees paid by public sector
organizations to their external auditors.
 Specific objective/Sub-problem 2. To provide evidence
on the determinants of audit fees paid by private sector
organizations to their external auditors.
 Specific objective/Sub-problem 3. To compare the
determinants of audit fees in the public and private sector
organizations to discern any pattern of
variation/association in audit pricing and explain why.
The research objectives
 Following are four key characteristics of subproblems.
1. Each subproblem should be a completely researchable unit.
 A subproblem should constitute a logical subarea of the larger research
undertaking.
2. Each subproblem must be clearly tied to the interpretation of the data.
 Just as is true for the main problem, each subproblem should involve
interpretation as well as collection of data.
o The subproblems must add up to the totality of the problem.
1. The old axiom that the sum of the parts equals the whole applies here.
o Subproblems should be small in number.
 If the main problem is carefully stated and properly limited to a feasible
research effort, the researcher will find that it usually contains two to six
subproblems.
The research objectives
 The objectives must be SMART:
 Specific. What precisely do you hope to achieve from
undertaking the research?
 Measurable. What indicators will you use to
determine whether you have achieved your objectives?
 Achievable. Are the targets you have set for yourself
achievable given all the possible constraints?
 Realistic. will you have the energy to complete the
research on time?
 Timely. Will you have time to accomplish all your
objectives in the time frame you have set
The Literature Review
 Scientific research is a collective effort of many researchers
who share their results.
 So, a literature review is based on the assumption that
knowledge accumulates and that we learn from and build on
what others have done. Hence, the researcher should
undertake an extensive survey of the literature related to the
problem.
 Its function is to review—to “look again” at (re + view)—what
others have done in areas that are similar, though not
necessarily identical to, one’s own topic of investigation.
The Literature Review
 You should remember that others have also conducted
research that is related to the topic.
 i.e. current studies build on previous studies.

 By fully acknowledging the research of others you will

avoid charges of plagiarism and the associated
penalties.
 Reviewing the literature critically will provide the
foundation on which your research is built.
The Literature Review
 The purpose of the literature survey is:
 to provide the researcher with an understanding of
the literature as it relates to the current project;
 to enable the researcher to learn from the efforts of
others;
 to help refine further the research question(s) and
objectives;
 to highlight research possibilities that have been
overlooked in research to date;
The Literature Review
 to summarize the results of previous research and
lay the foundation of your own research;
 to help you to avoid simply repeating work that has
been done already;
 to provide insight into research approaches,
strategies and techniques that may be appropriate to
your own research question(s) and objectives.
The Literature Review
 The purpose is not to provide a summary of everything
that has been written on your research topic.

 But to review the most relevant and significant

research on your topic.

 You will need to demonstrate that you are familiar with

what is already known about your research topic.
The Literature Review
 Where to find the Research Literature
 The literature sources can be divided into three
categories: primary (published and unpublished),
secondary, and tertiary.

 Primary sources for instance, include:

 published sources such as reports and government
publications such as planning documents –
unpublished sources such as letters, memos and
committee minutes, proceedings, etc.
The Literature Review: summary
 As a researcher, you should ultimately know the literature related to your
topic very, very well. An extensive literature review has many benefits:
 It can help you ascertain whether other researchers have already
addressed and answered your research problem or at least some of its sub
problems.
 It can offer new ideas, perspectives, and approaches that may not have
occurred to you.
 It can inform you about other individuals who conduct work in this area—
individuals whom you may wish to contact for advice or feedback.
 It can alert you to controversial issues and gaps in understanding that
have not yet been resolved—issues and gaps you might address in your
own work.
The Literature Review: summary
 It can show you how others have handled methodological and design
issues in studies similar to your own.
 It can reveal sources of data you may not have known existed.
 It can introduce you to measurement tools that other researchers have
developed and effectively used.
 It can help you interpret and make sense of your findings and, ultimately,
help you tie your results to the work of those who have preceded you.
 It can bolster your confidence that your topic is one worth studying,
because you will find that others have invested considerable time, effort,
and resources in studying it.
 Defines the field of the research.
The Literature Review: summary
 indicates the ‘state of the art’ in the field chosen;
 sets out the context – temporal, spatial, political etc. – of the
research;
 identifies seminal and landmark ideas and research in the field;
 establishes and justifies the need for the research to be conducted,
and establishes its significance and originality;
 sets out a rationale for the direction in which the study will go;
 establishes and justifies the methodology to be adopted in the
research;
 establishes and justifies the focus of the research;
 sets out and justifies the warrants to be used in the research design.
The Literature Review
 Secondary literature sources such as books and
journals.
 They are easier to locate than primary literature as
they are better covered by the tertiary literature.

 Tertiary literature sources, are designed either to help

to locate primary and secondary literature or to
introduce a topic - ‘search tools’
 They include indexes and abstracts as well as
encyclopedias and bibliographies.
The Literature Review
 In general, the following are the main sources:
 Computer: online and internet based sources-Google,
Web Pages, JSTOR, Econlit, etc.
 Books and Bibliographic indexes,
 Dissertations and theses,
 Government documents,
 Policy reports and presented papers,
 conference proceedings, magazines, etc.

 Usually one source leads to the next.

Types of Literature Reviews
 1. Context reviews is a background review and places a
specific project in the big picture.

 It introduces the rest of a research and establishes

the significance and relevance of a research
question.

 The review can summarize how the current research

continues a developing line of thought, or it can point to
a question or unresolved conflict.
Types of Literature Reviews
 2. Historical review traces the development of an issue
over time.

 It traces the development of an idea or shows how a

particular issue or theory has evolved over time.
 3. Theoretical reviews compare how different theories
address an issue.
 It present different theories and compare them for
the soundness of their assumptions, logical
consistency, and scope of explanation.
Types of Literature Reviews
 4. Methodological reviews point out how methodology
varies by study.

 In it researcher evaluates the methodological

strength of past studies.

 It describes conflicting results and shows how

different research designs, samples, measures, etc.,
account for different results.
Structuring the review
 The precise structure of the critical review is usually
your choice.

 Three common structures are:

 a single chapter;
 a series of chapters;
 throughout the project report as you tackle various
issues.
Structuring the review
 Summarize every article briefly; a sentence or two will
do
 Interpret the article in light of its relevance to your own
study
 Critique it, if necessary

 Show the stock of knowledge building up over the

course of the literature and show how your research
topic adds to this stock of knowledge
Structuring the review
 Several articles can be summarized in one mention

 Example: There have been numerous studies

attempting to measure the return to education (see
Becker (1963); Mincer (1968); Angrist and Krueger
(1988); Bound et al. (1991)).”

 How long should the literature review be?

 a useful guide is that your review is likely to be in the
region of 25–30% of your overall word count.
So far in this part we have discussed …
 The research process- research is broken down into a series
of steps.
 Steps involved in the research process
 Identification of a Research Topic
 The research questions
 Attributes of a good research topic
 Capabilities
 Appropriateness- worthwhile

 Defining the research problem and setting objectives

 The literature review
Development of working hypothesis
 After an extensive survey of the literature, researchers
should state in clear terms the working hypotheses.
 A hypothesis is a statement, which predicts the
relationship between two or more variables.
 It provides an anticipation of what will be found out
 It is a link between theory and the investigation.
 It provides a logical framework that guides a researcher
while designing a research study and collecting data.
 Formulating hypothesis is particularly useful for causal
relationships.
Development of working hypothesis
 Hypothesis
 an unproven proposition (that is empirically testable), logical
supposition, a reasonable guess, an educated conjecture that
provides a tentative explanation for a certain fact or
phenomenon under investigation;
 are a set of suggested tentative solution of a research problem,
which can be or may not be a real solution.
 it may direct your thinking to possible sources of information that
will aid in resolving one or more subproblems and, as a result,
may also help you resolve the principal research problem.
Development of working hypothesis
 Hypothesis
 The word Hypothesis is composition of two words, “Hypo” and
“Thesis”. Hypo means “under or below” and thesis means “a
reasoned theory or a rational viewpoint”.
 means a theory which is not fully reasoned.
 is a proposition that can be tested for association or causality against
empirical evidence (data based on observation or experience, e.g.
survey data)
 Each hypothesis is formulated as a statement about a relationship
between two variables and can be expressed in the null or the
alternative form
Development of working hypothesis
 Testing Hypothesis (the null hypothesis)
 Is the process of comparing observed data with the results we would
expect from chance alone:
1. State the hypothesis (null and alternative)
2. Determine the appropriate test statistics
3. Specify the significance level (i.e. namely, “giving a signal” that certain
dynamics are operating within the data and merit attention).
4. Determine the decision rule
5. Collect data & perform the needed conclusion
6. Decide to reject or not reject and produce conclusion
Characteristics of useable hypotheses
 There are some important criteria for judging the
goodness of a hypothesis.

 The hypothesis must be conceptually clear.

 This involves two things
 the concept should be clearly defined
 the hypothesis should be commonly accepted ones.
i.e. the hypothesis should be stated in simple terms.

 The hypothesis must be specific.

 assure that research is practicable and significance.
Characteristics of useable hypotheses
 The hypothesis should be related to available techniques.

 The hypothesis should be related to a body of theory.

 It should poses theoretical relevance.

 The hypothesis should be testable.

 hypothesis should be formulated in such a way that it is
possible to verify it.
Characteristics of useable hypotheses
 Null and Alternative hypothesis
 Null hypothesis (Statistical hypothesis) –Ho
 a proposition that states a definitive, exact relationship between two variables
 States that the population correlation between two variables is equal to zero
or that the difference in the means of two groups in the population is equal to
zero (or some definite number)
 Expressed as no (significant) relationship between two variables or no
(significant) difference between two groups
 Alternative hypotheses (Research hypothesis) –Ha/H1
 the opposite of the null
 Statement expressing a relationship between two variables or indicating
differences between groups
The null and the alternative hypothesis
 The null hypothesis (H0) states that the variables are independent of one
another (ie there is no association)
 The alternative hypothesis (H1) states that the variables are associated (ie
there is an association)
 H0 is the default
 H1 is accepted only if the test result provides significant evidence to reject

H0
 If you predict the IV has an effect on the DV in a particular direction, it is
known as a one-tailed hypothesis
 A two-tailed hypothesis is where you cannot predict the direction

89
 Example: Hypotheses to be tested
H1 Voluntary audit is positively associated with turnover
H2 Voluntary audit is positively associated with agreement that the audit provides a
check on accounting records and systems
H3 Voluntary audit is positively associated with agreement that it improves the
quality of the financial information
H4 Voluntary audit is positively associated with agreement that it improves the
credibility of the financial information
H5 Voluntary audit is positively associated with agreement that it has a positive
effect on the credit rating score
H6 Voluntary audit is negatively associated with the company being family-owned
H7 Voluntary audit is positively associated with the company having shareholders
without access to internal financial information
H8 Voluntary audit is positively associated with demand from the bank/lenders
H9 Voluntary audit is positively associated with the directors having qualifications
or training in business or management
90
Possible Sources of Hypothesis
 Hypothesis may be developed/formulated from a variety of sources, including the
following:
 Hypothesis originates in the science itself or in the scientist:
Analogies (comparisons or analogies between social and natural systems).
 Hypothesis may rest also on the findings of other studies (e.g. exploratory)
 A hypothesis may stem from a body of theory
 value orientation of the culture in which a science develops
may furnish many of its basic hypotheses
 To conclude the ideal source of fruitful and relevant hypothesis is a fusion of past
experience and
imagination of the researcher.
 Hypotheses to be tested
H Voluntary audit is positively associated with turnover
1
H Voluntary audit is positively associated with agreement that the
2 audit provides a check on accounting records and systems
H Voluntary audit is positively associated with agreement that it
3 improves the quality of the financial information
H Voluntary audit is positively associated with agreement that it
4 improves the credibility of the financial information
H Voluntary audit is positively associated with agreement that it
5 has a positive effect on the credit rating score
H Voluntary audit is negatively associated with the company
6 being family-owned
H Voluntary audit is positively associated with the company
7 having shareholders without access to internal financial
information
H Voluntary audit is positively associated with demand from the
92

8 bank/lenders
End of Ch02 – Next Ch03

Compiled by Andualem 93
(2015/2023)