Riphah International University

Faculty of Management Sciences

Riphah School of Leadership
End Term Examinations, Spring 2020

Subject : ARM FINANCE Teacher Name : Syed Danial Hashmi

Marks : 40 (will be converted to 20) Time Allowed : 180 minutes

Instructions:
1. Read all questions carefully before making any attempt.
2. Believe in yourself more than anyone else.

Question-1

a) Do you think the concept of “profit” is socially constructed? How may such absolute
figures be a social construction of reality and not “real”? What are the ontological and
espitemogical positions of those who may believe profit as a real phenomenon as
compared to those who consider it a socially constructed phenomenon?
b) You want to work on the area of corporate social responsibility and have found that there
is a lot of literature pertaining to the relationship of CSR and financial performance.
However, you have noted that the existing literature shows mixed results. Would you still
be motivated to do research in this area? Why or why not?

Question-2

a) “Products of the theorizing process seldom emerge as full- blown theories, which mean
that most of what passes for theory in organizational studies consists of approximations.
Although these approximations vary in their generality, few of them take the form of
strong theory, and most of them can be read as texts created "in lieu of" strong theories.
These substitutes for theory may result from lazy theorizing in which people try to graft
theory onto stark sets of data. But they may also represent interim struggles in which
people intentionally inch toward stronger theories. The products of laziness and intense
struggles may look the same and may consist of references, data, lists, diagrams, and
hypotheses. To label these five as "not theory" makes sense if the problem is laziness and
incompetence. But ruling out those same five may slow inquiry if the problem is
theoretical development still in its early stages.” (Weick, 1995, p.1).

Critically analyze the above passage and explain what makes a good theoretical
framework for a research study?

b) Briefly explain how agency theory (Jensen & Meckling, 1976) can provide justification
for the given hypothesis:
The strength of the association between board diversity based on gender, nationality and
ethnic minority directors, and financial performance is stronger in better governed firms.
Question-3

From the given table: formulate hypotheses, formulate equation (considering that model uses
panel data), suggest some suitable title for the research work and interpret the results.

Regression Analysis
Variable Coefficient Std. Error t-Statistic Prob.  
C 50.21 13.74 3.65 0.0003
ERM 2.40 0.71 3.39 0.0007
MBD 4.78 1.81 2.63 0.0087
SIZE -5.24 1.83 -2.8 0.0045
EU 2.32 1.04 2.23 0.0259
R-squared 0.506
Adjusted R-squared 0.502
Durbin-Watson stat 2.121
F-statistic 112.7
Prob(F-statistic) 0.000

Where, Explanatory variable= firm performance, ERM= “Enterprise Risk Management”, MBD=
“Monitoring by Board of directors”, EU= “Environmental Uncertainty”.

Question-4

This question is related to the data provided in the excel sheet. Using the given data do the
following:

1- Import data to STATA

2- Report the descriptive statistics (Paste the table from STATA as well as make a table
using APA format)
3- Run correlation analysis
4- Regress using following equation
BDi ,t   0  1 ( IDi ,t )   2 (CAPEX i ,t )  3 ( ROEi ,t )   4 (ln TAi ,t )  5 ( BGDi ,t )  i ,t
5- Report the results both as STATA copied table and in APA format