2.0 Introduction The study has covered different aspects of productivity and profitability of sample banks.

It has been segmented into different chapters such as Management of productivity and profitability, Factors Influencing Productivity and Profitability of Commercial Banks, Analysis of productivity and Profitability of Commercial Banks, Relationship between Productivity and Profitability of Sample Commercial Banks, Relationship between Productivity. It has used relevant research design, method of analysis and test of significance for analysis of data. The present study has analyzed productivity and profitability of both NCBs and PCBs with the help of appropriate methodology. This chapter discussed methodological aspects, highlighting selection of methods, selection of sample, tools for data collection, and sources of data. Discussion is also made on theoretical framework of analysis, different ratios and statistical tools & various variables that are used in the study.

2.1 Sampling Design of the Study The study is the outcome of both theoretical and empirical one. Both primary and secondary data have been used in this study for accomplishing the research objective. The study has examined on the following number of Banks. At present, 52 banks are operating in Bangladesh. Out of these four Banks are nationalized, two Banks are denationalized, twenty-two private Commercial Banks, ten Foreign Banks and four Specialized Banks. In the present study, two (2) Public and two (2) private banks have been selected purposively. These are: 1. Sonali Banks Ltd. 2. Janata Bank Ltd. 3. Eastern Banks Ltd. and 4. Trust Bank Ltd. Research has selected ten concerned officials from each sample bank for collecting primary data with the help of interview guide. The sampling frame is the scrutinized nominal list of the serving managers of the corporate head office and branches in Chittagong City and the nominal list of the serving staffs of the corporate head office taken as the population for this survey. 2.2 Data Collection The researcher has collected both primary and secondary data to meet the information requirement of the study.

2.2.1 Primary data Primary data were related to the opinions and attitudes of the respondents. Primary data were collected by means of Personal interview, Documentary evidence, Questionnaire, Relevant file study. The study has collected primary data through structured questionnaire. Some required data are collected in the course of the study with the help of open discussion with Managing Director, the Executive Director, General Manager, Asst. General Manager, and Manager. Some of the primary data have also been collected from employees concerned. The respondents included various categories of officials of bank working at the Head office level and branch level. At head office level, Assistant vice president of sample bank, at the branch level, manager of each sample bank were selected on the basis of availability and access. Primary data were collected on the basis of a questionnaire designed in the light of the objectives of the study. The questionnaire had three features first: Open ended questions, regarding various aspects of productivity and Profitability management to give opportunity to the respondents to express their opinion freely. Secondly: Close-ended questions giving respondent to choose among alternatives. Third: Five point rating scales wherein respondents were to tick the appropriate box. The five point rating scale was used to measure the attitude of respondents. The questionnaire was prepared on the basis of comments of experts. The questionnaire was filled up through direct interview method. The researcher personally interviewed the respondents and also recorded the personal observations as disclosed in informal discussion in a note book. Most of the primary data and opinion of selected respondents have been collected by the direct personal interview with help of prepared questionnaire. It ensures cent percent response from the respondents method also offers an opportunity to explain the questionnaire wherever it is necessary and thereby helps to obtain the correct replies (Hye, A., 1982). The observation method is an important technique of social science data collection. It is a process of scientific investigation whereby the observer is placed in a social situation for the purpose of collecting necessary information. (Managaret S., 1970). Black and Champion define observation method as a process of watching and listening to other persons behavior over time without manipulating or controlling it and recording findings in ways that permit some degree of analytical interpretation (Black and Champion, 1976). 2.2.2 Secondary Data The study has used secondary data substantially. The researcher has collected secondary data from published sources and official records of sample banks. Secondary data for the study have been collected from following published sources: i) Annual Reports of the selected banks.

ii) Bangladesh Banks reports and from Resume of the Activities of Financial Institutions in

Bangladesh published by Ministry of Finance, Government of Bangladesh. iii) Statistical Year Book, iv) Bangladesh Economic Survey, v) World Bank Publications. vi) Websites. In addition, some unpublished data were collected from official records of sample banks and Bangladesh bank. 2.4 Methods of Analysis After receiving the primary data from the questionnaire, it is placed in the data instrument sheet. The relevant mathematical and statistical analysis is done manually to find out the frequency distribution and other analysis. Formulation of hypothesis on the basis of the collected data with the aim of obtaining the desired result has been extensively carried out. The final conclusion is drawn on the basis of the analysis on the entire process. Both primary and secondary sources of information were used for this report. For the organization part, secondary sources were the major source. For the project part, both primary and secondary sources of data were used as and when required as per merit. 2.4.1 Correlation Analysis Correlation Analysis attempts to study the relationship that exists between two or more variables. The correlation co-efficient of the selected independent variables with the bank profitability has been worked out in order to identify the most important variables or the variable which has higher association with the dependent variable. Also, the correlation co-efficient among the different variables has been calculated so as to arrive at a correlation matrix which incorporates correlation co-efficient of the entire selected variables with the dependent variable. The test of significance has also been applied in order to identify the variables which have significant correlation. In correlation Analysis-the zero-order Correlation Matrix and Multiple Correlation Co-efficient are discussed as follows: 2.4.1.1 The Zero-order Correlation Matrix When the correlations between many variables are computed, they are often organized in matrix form of the selected sample data. Since the correlation rjk between Xj and Xk is the same as rkj between Xk and Xj, only the bottom triangular portion of the matrix is given. The matrix provides a way of easily comparing correlations (this shows the virtue of having a correlation which is comparative, i.e., which is not dependent on the units of the original data, and which has the same upper and lower bounds of +1.00 and more systematic methods are available for defining

the interrelationships among the variables as displayed in the table, such as factor analysis. Meaning of zero or near zero correlation means simply that two things vary separately. That is, when the magnitudes of one thing high; the others magnitudes are sometimes high, and sometimes low. It is through such uncorrelated variation-such independence of things-that we can sharply discriminate between phenomena. Zero correlation represents complete independence and -1.00 or 1.00 indicates complete dependence. Two variables are then statistically independent if their correlation is zero. This research involved un-widely manner some individuals compute the zero order correlation co-efficient for a correlation Matrix. Its Examination of statistical text books as well the literature has revealed, it has been obtained, into any of the statistical measures on groups of measures associated with it. This method minimizes the time needed for such computational, at the same time enhancing, the accuracy of the final result. The model consists of two computational matrices, matrix one being the summation matrix. The entries on these matrices are arranged so as to facilitate the future computation. The correlation matrix is basic to many kinds of analysis. It is a bridge over which scientists can move from their data to sophisticated statistical analyses of patterns, dimensions, factors, causes, interdependencies, discriminations, taxonomies, or hierarchies. 2.4.1.2 Multiple Correlation Coefficients The Correlation Coefficient generalizes to the situation where one variable Y is pitted against a set of variables {X1, X2,.Xn}. the strength of the linear link between Y and {X1, X2, .Xn} is then measured by Multiple Correlation Coefficient. The sample Multiple

Correlation Coefficient, R, is a measure of the strength of the association between the independent (explanatory) variables and the one dependent (prediction) variable. Interpretation of R. Strength of the Association: The strength of the association is measured by the sample Multiple Correlation Coefficient, R. R can be any value from 0 to +1. The closer R is to one, the stronger the linear association is. If R equals zero, then there is no linear association between the dependent variables and independent variables. Unlike the simple correlation coefficient, r, which tells both the strength and direction of association, R tells only the strength of the association. R is never negative value. This can be seen from the formula below, since the square root of this value indicates the positive root.

Formula for R Formula for two independent variables, X1 and X2

R=

The Multiple Correlation Coefficient plays a central role in Multiple Linear Regression, as R2 is then equal to the ratio of the explained variance to the total variance, and is therefore a measure of the quality of the regression. So, this respect, there is a complete similarity between Simple and Multiple Linear Regression. 1 0 Perfect linear relationship No linear relationship

No other Values of R have precise definitions of strength. 0.9 0.5 0.25 2.4.2 Regression Analysis Regression Analysis attempts to study the functional relationship between the variables and provides a mechanism for prediction. As profitability of banks the result of several variables, the impact of each selected variable on bank profitability has been studied individually (through univariate regression analysis) as well as collectively (through multiple regression analysis) 2.4.2.1 Univariate Regression Analysis Univariate Regression Analysis is concerned with estimating value of one variable on the basis of observed value of another variable. The regression equation of Y (dependent variable) on X (independent Variable) Can be expressed as follows Y = a +b X +e Where `a and `b are constant/ parameters. The parameter `a determines the level of the fitted line and the parameter `b determines the slope of the line i.e. the change in Y per unit change in X. The symbol Y stand for the value of Y computed from relationship for a given X plus the error component. Strong association Moderate association Weak association

2.4.2.2 Multiple Regression Analysis The order to investigate the effect of several independent variables on the dependent variable (Y) a multiple regression model has been used. The linear multiple regression model involving the independent variable and independent variables (X2, X3,.Xp} can be written as Yi = + 2 X2 + 3 X3 + p Xpi + ei Where denotes the intercept 2 p are the partial regression co-efficient, I =1..nobservation and e, is the residual term associated with the `i th observation. This the multiple regression model gives the expected value of Y conditional upon the fixed values of X2, X3..Xn, plus the error component. Many procedures have been developed to estimate the regression co-efficient of selected independent variables. 2.4.3 Factor Analysis Factor analysis is a method of reducing a large number of variables (tests, scales, items, persons and so on) to a smaller number of presumed underlying hypothetical entities called factor (Fruchter, 1967). It tries to simply the diverse relationship that exist among a set of observed variables by uncovering common dimensions or factors that ink together the seemingly unrelated variables and consequently provides insight into the underlying structures of the data (Dillion and Goldstein, 1984). The purpose of factor analysis is mainly two folds: data reduction and substantive interpretation. in the present study, Principle Components Varimax Rotated Method of factor analysis has been used in order to identify the factor that influences on profitability of sample banks of Bangladesh. Principle component factors explain more variance that the loadings obtained from my method of factoring. In order to define the group membership, an algorithm may be used to uncover a structure purely on the basis of the correlation structure of the input variables. Then the number of principal components to be retained in the study has been decided on the basis of Kaisers criterion (1958) of Eigen value 1. Principle components having higher reliability coefficients are more reliable in the sense that the corresponding factors would be replicable in other similar kind of studies. Then Communality, symbolized by h2----- are then worked out which show how much of each variable is accounted for by the underlying factors taken together. Then factor scores have been generated on the basis of weighted average of Principle factors loadings and average of respective variables included into the concerned group. Ranking of each factor has been made on the basis of scores derived.

One of the major problems associated with regression analysis is that of multicollinerarity. The consequences of multicollinearity are imprecise and unstable estimates. (Sharma, M.K., 1981).Usually the problem of multicollinearity is solved by deleting one or more of the highly collinear variables. But this practice is objectionable on three grounds. First, loss of information is caused or variables of interest may be shed form the model. Secondly, it leads to biased and inconsistent estimates of the co-efficient of retained variable. (Theil, H., 1667). Thirdly, the estimated co-efficient of retained variables embody the combined effects of the retained and omitted variables. Due to these difficulties, the technique of factor analysis is often applied is isolate the different factors. This method avoids a number of problems inherent in the conventional studies. (Adelman and Morris 1967) and other have recommended factor analysis technique as an appropriate technique to the studies of development variables. In contrast to regression method, factor analysis deals directly with correlative dependence by arranging variables into independent variable linear combinations and permits any indicator to be tested as a dependent variable of a small of underlying or common components. In addition, rather than forcing deletion of variables and loss of information, the procedure encourages an expansion of the variable set. This is an important methodology since it lessens the possibility that one or two over-loaded hybrid variables will acquire greater importance than they merit, thus, the purpose of factor analysis is mainly two fold: data reduction and substantive interpretation. The first purpose concerns summarizing the important information in a set of `P variable by a set of less than `P factors. The latter purpose is concerned with the search for and the testing of constructs that underline the observed variable. The procedure of factor analysis attempts to estimate the value for the co-efficient of regression when the variables are regressed upon the factors. These co-efficient are referred to as `factor loading. The matrix of factor loading provides the basis for grouping the variables into common factors. Each variable is assigned to the factor, where it has the highest loading. Let us assume that there is k(i+1..k) Variables, n(j=1.n) banks and in factors. The factors analysis model in the matrix notation then may be written of ( Kaur, Kuliwinder, 1983) as below: X(kxn) = Where, X = the matrix of variables of order (kxn) A(kxm) x Z(mxn)

A= the matrix of factor loadings of order (kxm) Z = the matrix of factors of order (mxn) In factor analysis, factors are formed in such a way that (i) Those variables that are most clearly inter- correlated are combined within a single factor, (ii) The variable allocated to given factor are those that are most nearly independent of the variables allocated to the other factors, (iii) The factors are derived in a manner that maximize the percentage of total variance attributable to each successive factor (given the inclusion of the preceding factors), and (iv) The factors are independent (Uncorrelated with each other.) (Adelman and Morris 1967).

2.4.4 Techniques Followed: Data has been collected with care by the researcher. The primary data from the questionnaire is placed in the data instrument sheet. Data is related to the objective of the study. Then these have been analyzed by employing financial techniques ratio and statistical techniques mean, efficient of correlation, graphs etc. the statistical result has been tested by employing test some mathematical tools such as percentage; ratios etc, were prepared to analyze the report. To get a better picture of the performance of banks, this ratios have been analyzed and interpreted by calculating Mean (X), Standard Deviation (S.D) and Co-efficient of Variation (C.V).

2.5 Test of Significance The study has employed financial, statistical and econometric techniques for analysis of data. The study has also used T test, F test, Chi square test, ANOVA test for testing the results and finally testing the hypotheses of the study adopted. The analytical framework for profitability management has been designed with the help of two very simple but powerful instruments of logical reasoning. The first is the periodical income and expenditure flows. The difference between these two flows by definitions is the profit. The second is the balance sheet, which contains the assets and liabilities of a bank as on a particular date. Since a bank deals essentially in funds. This statement shows, as an on date, the volume of funds raised and deployed by the bank. These two simple concepts are powerful and adequate enough to help develop the designed framework.

2.6 Theoretical Framework This section attempts to present the theoretical concepts of productivity and profitability. A theoretical framework provides focus to all the subsequent steps in planning and conducting out the study, e.g., charting variables and their relationships. It makes it possible to generate a relatively complex set of objectives and questions; it provides a basis for including and excluding literature and research that is actually related to the inquiry by identifying the variables of greatest interest and concern; and it provides focus to the inquirers procedural planning and choices from initial design selection, through analysis and interpretation of data, e.g, research design, statistical tests, making sense of empirical findings. A theoretical framework pays a great deal of attention to the performance of banks, in terms of productivity and profitability.