ABSTRACT
Stockbroking
firms play a fundamental role in a country’s capital market system. The
performance of stockbroking firms is generally perceived as low by their
customers. It was therefore, necessary to find out the extent to which this was
true and the role played by organizational characteristics such as leadership
style, employee trust, and information culture. It is in light of this that the
study examined how leadership style, employee trust and information culture
contributed to the performance level of stockbroking firms in Nigeria.
The
survey design was used. The target population consisted of 1,222 employees from
184 stockbroking firms in Nigeria. Proportionate stratified sampling technique
was used to select 606 employees from 94 stockbroking firms. A validated
questionnaire was the instrument used for data collection. Reliability
coefficient of each of the variables ranged from 0.74 to 0.89. Response rate
was 85%. The data were analysed using
descriptive statistics and regression.
The
study showed a significant influence of leadership style on organizational
performance = .178; p < 0.05); likewise, employee trust
showed a significant influence on organizational performance = .156; p < 0.05) and information culture
also showed a significant influence on organizational performance ( = .190; p < 0.05). The combined influence
of leadership style, employee trust and information culture on organizational
performance was significant = .193, F(3,511) =
41.88, p < 0.05). The isolated
influence of positive intention as an indicator of employee trust on
organizational performance was not significant (β = 0.380; t = 0.879; p
> 0.05). Likewise, information sharing (β = 0.001; t = 0.017; p > 0.05) information
transparency (β = 0.027; t = 0.534; p > 0.05) and information control (β =
-0.094; t = -1.960; p <
0.05) as indicators of information culture did not contribute
significantly to organizational performance of stockbroking firms in Nigeria.
The
study concluded that factors such as leadership style, employee trust, and information culture contributed to the low
performance of stockbroking firms in Nigeria. It recommended that in order for
stockbroking firms to perform optimally, the Nigerian Stock Exchange and
Security and Exchange Commission should orientate managers of stockbroking
firms on the need to be transformational in leadership style display, encourage
teamwork and allow their employees to be innovative and improve on their
organizational information culture.
CHAPTER ONE
INTRODUCTION
1.1 Background
to the Study
Performance
of firms has generated much controversy among scholars over time owing to its
sensitivity. Since organizations play a basic and crucial role in day to day
lives of people, the conceptual consensus among scholars is that performance of
firms could be understood from two perceptions – financial and non-financial
indices. Elements of financial indices in this context are of the following:
profit sharing, market share, return on sales and growth rate. On the other hand, it is
believed that these financial indices alone will not determine the true
performance level of a firm considering the fact that there could be
distortions of figures and facts, and that there is every tendency that
organizational heads may want to present impressive and enticing figures to
customer or clients so as to gain more patronage from them. It is also believed
that non-financial indices will go a long way in truly determining the
performance level of an organization. Some of these non-financial components
are: innovation, teamwork, employee satisfaction, perceived profitability and
effective service delivery.
Technological,
managerial, market and process innovation are some forms of innovation
identified to serve as innovative constructs that will enhance the performance
level of an organization. Gunday, Ulusoy, Kilic and Alpkan (2015) are of the view that the
introduction of all forms of innovation will contribute to an organization’s
performance level. Also, the welcoming and application of innovative ideas by
the management of an organization from its employees has been argued by
scholars to serve as a platform for enhancing organizational performance.
Satisfaction
with monthly wages, favorable working condition, organizational policies and
incentives are intangible asset that contribute to how satisfied employees are
with their job. Though often treated as a major construct of study, scholars
have empirically proven that employee satisfaction is a strong component of
organizational performance (Latif, Ahmad, Qasim, Mushtay, Ferdoos & Naeem,
2013). In some quarters, employee satisfaction is interchangeably used for job
satisfaction. The major premise of the school of thought in this context is
that when workers are dissatisfied with their jobs, they become docile in terms
of carrying out various tasks assigned to them and this could in turn affect
the performance level of the organization negatively. It is however believed
that when organizational heads have the interest of their employees at heart
and they put all necessary apparatus in place to foster the welfare of their
employees, maximum performance will be gained by the organization since
employees are the major backbone of a firm.
Teamwork
plays a crucial role in enhancing organizational performance. Teamwork effectiveness
could be used as a tool by organizations to remain competitively relevant in
contemporary times. Abdul-Azeez, Olateju, Ibrahim and Remi (2009) revealed that
when employees and managers of firms work as a team, they break grounds because
difficult tasks are easily solved and brainstorming on issues posing as threat
to the survival of their organizations becomes highly effective. Employees in
high flying organizations that always work together as teams will continue to
remain in business, due to the fact that an atmosphere of coherence has been
created, thereby providing an enabling environment whereby even the least
employee in the firm is encouraged to offer constructive solution to difficult
tasks.
A
performing firm has a lot to do with effective and efficient way of rendering
services to clients. The way and manner
customers are attended to determine how long they will continue to patronize
that firm. Talib and Ali (2014) are of
the view that when customers are satisfied with services rendered by an
organization, they will continue to transact business with that organization
which will in turn yield a positive turnaround for the firm. Service delivery
is not only about rendering services to customers, but rather responding
promptly to customer’s queries and organizing follow up programmes for clients.
Also introducing strategies to curb frequent complaints from customers could be
one fundamental way in which organizations will actually offer efficient
services to their clients. This action will trigger high level performance.
Profitability
is perceived as one fundamental way in which performance of a firm could be
determined. For companies to record high
profit maximization, not only could this be achieved by sales and production,
but also by prompt payment of dues to regulatory bodies governing activities of
the organization, internal revenue generation by the organization and also
being able to pay off any outstanding debt in due course of time. In most
cases, financial result serves as an evidence to show that an organization is
maximizing profit. However, Donaldson (2003) found that when organizations
ethically carry out their daily business, there is tendency that they will perform optimally. A performing
organization must have been managed by an effective leader who enjoys the
strong support of his followers, that is, the employees. This support must have
been earned over time basically because certain traits and behaviors displayed
by the leader must have gone down well with his employees.
Leadership
as a concept has been affirmed to be one of the predictors of performance in
all types of organization. It is fundamentally seen as the character trait of a
leader to influence people in achieving
set goals (Karamat, 2013). However, leadership style is a behavior exhibited by
an individual or the head of an organization coupled with his way of providing
influence, implementing plans, and motivating people under his leading. There
are basically two contemporary leadership styles that have gained the attention
of researchers over time. These are transformational and transactional
leadership styles. Transformational leadership style is that kind of leadership
style exhibited by a person that influences and inspires (transforms) groups of
individuals to attain astonishing aftermaths (Robbins & Coulter 2007). A
transformational leader displays certain behavior that enable him to win the hearts of his
followers. These behavior serve as the four perspectives of transformational
leadership style which are: idealized influence, inspirational motivation,
intellectual stimulation and individual consideration.
Idealized
influence is characterized by aspiration and intellect of undertakings,
enforcing conceit in and amidst groups, and earning admiration of his followers
while inspirational motivation is precisely a cohort of idealized influence and
is associated with a leader being pragmatic, thus becoming a locus point by his
followers. Intellectual stimulation as another component of transformational
leadership creates and enables the inspiring of new ideas and emboldens them to
depart away from the outdated ways of reasoning. This kind of leader is seen as
one sponsoring aptitude, level-headedness, coherent thinking, problem solving
and lastly, individual consideration, is associated with evolving followers by tutoring and mentoring
(Bass, 1985; Bass & Avolio, 1990). In this case, the leader instills and
enables others develop their strong point, and listens courteously to others.
Here, followers are pickled individually to raise their levels of mellowness
and to enhance disciplined conducts of addressing their goals and experiments.
Transactional
leadership focuses on leader-follower exchange. Followers carry out
instructions based on the direction of their leaders and leaders in turn
positively reward their efforts. Sadeghi and Pihie (2012) are of the view that
transactional leaders allow followers to fulfill the leader’s own
self-interest, minimize workplace anxiety and concentrate on clear
organizational objectives such as increased quality, customer service, reduce
costs and increase production. Certain facets have been identified to make up
transactional leadership style and these are contingent reward, active
management by exception and passive management by exception.
Contingent
Rewards is a situation whereby transactional leaders contextualize aim to
recompense, elucidate expectations, offer essential assets and deliver various
kinds of rewards for fruitful performance. Their core emphasis on contingent rewards
is hinged on precise, quantifiable, achievable, convincing, and judicious
objectives for their subordinates. Active management by exception is a situation whereby
transactional leaders display the effort of their subordinates, deliberately
observing nonconformities from guidelines and values and take curative action
to prevent errors while passive management by exception is when transactional
leaders intrude only when values are not realized. They may even introduce punishment as a way
of getting rid of unacceptable performance.
Findings
on the influence between transformational, transactional leadership style and
organizational performance Paracha, Qamar, Mirza, Hassan and Waqas (2012) have
it that transformational leadership style had additional effect on
organizational performance than transactional leadership style. Another
fundamental factor that stimulates organizational performance is the level of
trust that exists between employees and their superiors in an organization.
Employee
trust has been a major phenomenon within organizational settings. It is seen as
the level of mutuality that exists among employees and their superiors working
for an organization. Absence of trust between employees and their superiors
could actually lead to all sorts of chaotic scene in an organization and this
could bring about low level performance in that organization. Paliszkiewicz
(2010) is of the view that trust is the
belief that a party ‘a) will not act in a way that is hurtful to a trusting
firm, b) will behave in such a way that
is favorable to the trusting organization, c) will act dependably, and
d) will perform or answer in an obvious and mutually suitable style. According
to him, trust will be understood to serve as a bond between previous practices
and foreseen future. Widely accepted work on trust could be attributed to
Martins (2000) who sees employee trust emanating from five dimensions namely:
openness in communication, fair dealing with employees, honesty in keeping to
promises, positive intention to employees and belief in management/superiors.
Openness
in communication in an organization paves way for employees to have absolute
trust in their superiors. When this is not in place, employees will begin to
suspect their employers of not being transparent in their dealings with them.
And when suspicion thrives in an organization, there is tendency that employees
will no longer want to put their best in their jobs and this will culminate
into low performance for the organization. Not being fair in dealing with
employees especially in terms of being partial, witch hunting employees,
deliberately seeking for an avenue to relieve workers of their jobs or
deliberately looking out for mistakes of employees could make employees lose
trust in their employers. Apart from being unfair in dealing with employees,
not keeping to promises made by employers to their employees is also another
way in which employees will lose their trust in their employers. Preference for
a particular employee against another could bring about factionalism in an
organization. This is closely associated with employers not having positive
intention towards their employees and this could also make employees not to
have faith or belief in the management of the organization. When all this is in
place, low performance will always be the lot of that organization. Every
organization deals with information - this is a key resource that adds values
to an organization especially when utilized in an effective way. Its value as
an asset to an organization has some form of root from the concept of
information culture.
Information
culture is a pattern of approaches and conducts that shows the psychological
orientation of a firm towards information. Davenport and Prusak (1997) believes that this culture is
replicated in the corporation’s norms, values, philosophies and practices which
impacts on the way information is alleged, formed and used. This implies that a
well instituted information culture could impact on an organization’s
performance level. The tenacity to assert the place of information culture in
the administrative setting of a firm could give rise to the probe on
information culture. Though, as a
concept not yet very popular, has every tendency of impacting significantly on
organizational performance.
Information
culture supports the culture of an organization in achieving set goals but it
is mostly associated with a culture where the significance and effectiveness of
information in attaining effective and tactical success accomplished is recognized.
It is a culture where information constitutes the platform for organizational
resolution making while exploiting information technology for enhancement. This
is made possible by providing a platform through which information is put to
maximal utilization. Choo, Bergeron, Detlor
and Heaton (2008) is of the view
that information culture and information use are intensely related. They
believed that information culture defines information use when they asserted
that information culture deals with informally collective outlines of behavior,
standards, and value that define the implication and use of information where
information integrity, formality, control, sharing, transparency and
pro-activeness form the characteristic elements of information culture. It is
noteworthy here that this is a distinctive kind of culture where information
itself is the constituent of that culture.
In a study by Roberts, Rollins and Kristel (2005) on the influence of
information culture on performance, reported that several of the indicators of
information culture as listed above had a strong influence on performance.
Among the indicators, identified were information integrity and information
sharing where they claimed had the strongest significant influence on organizational
performance.
In
any part of the world, stockbroking firms play a fundamental role in a
country’s capital market system. The Capital Market is simply a market where
stocks, bonds, commodities, foreign exchange and even derivatives are traded to
raise cash for government or businesses, reducing companies’ risks and
increasing investors’ wealth. The capital market is the avenue through which
funds are generated, mobilized and availed effectively and efficiently from
investors to the users of funds. In the Nigerian context, active players in the
capital market system consist of the
Nigerian Stock Exchange (NSE), Discount Houses, Development Banks, Investment
Banks, Building Societies, Stock Broking Firms, Insurance and Pension
Organizations, Quoted Companies, the government, individuals and the Security
and Exchange Commission (SEC).
A
Stockbroking firm is an organization that acts as an intermediary for stock
market. It provides or offers investors various choices of services coupled
with investment advice and also buys and sell equities on behalf of investors
(Odita, 2011). The active players in a stockbroking firm are stockbrokers,
administrators of the company and also marketers. Stockbrokers in Nigeria are
licensed to carry out operations by the Securities and Exchange Commission
(SEC). They are expected to operate within the ambit of the market. From
observation, dishonest practices such as manipulation of customers’ accounts,
buying and selling of stocks without the mandate of the client, not being transparent
in dealing with clients etcetera are some of the ugly developments that have
eroded the Nigerian Stock Market and have at the same time destroyed investors’
confidence in investing in the country’s stock market. In line with keeping to best practices in
terms of sanitizing the Nigerian Stock Market system and increasing the
performance level of stockbroking firms, the SEC introduced certain operating
standards in 2013 for stockbroking firms. These standards are: introduction of
technological innovation practices, effective and efficient manpower and
apparatus resources, workable organizational configuration and control, actual
operational procedures and international effectiveness. The idea behind this is
that if stockbroking firms comply and implement these operating standards,
investors’ confidence will be hugely restored in investing in the nation’s
stock market.
Stockbroking
firms are still groping and trying to find their stability in living up to
their core responsibility which is carrying out trading activities on behalf of
their clients in the genuine way more so considering recapitalization policy
introduced by the SEC in 2012 (Odita ,2010). With some stockbroking firms being
unable to meet up to the recapitalization within the deadline of September
30th, 2015, many were advised by the SEC to merge with other stockbroking firms
or redefine their financial responsibility status. With all these in place, the
performance level of many stockbroking firms is still worth being questioned as
there are many stockbroking firms still
unable to meet up with the needs of
their clients. This has really made many investors to nurse the feeling that
stockbroking firms in Nigeria are under-performing.
This
study is premised on the belief that a good measure of organizational
performance and leadership style play a fundamental part in determining the
performance level of firms. There are divergent leadership styles existing, but
the most recent and more commonly spoken of are transformational and transactional
leadership styles. Another intrinsic influence considered in this study is the
relationship between employee trust and organizational performance. The
influence will be examined from the perspective of employee trust indicators
which are: openness in communication, fair dealing with employees, honesty in
keeping to promises, positive intention to employees and belief in management
and supervisors. Also, the last independent variable examined in this study is
Information culture. This study posits that when organizations have an information culture they perform
better in contributing to the
performance level of firms. In the light of the forgoing, information culture
will be examined from the perspective of information integrity, information
formality, information pro-activeness, information transparency, information
control and information sharing.
1.2 Statement of the Problem
Lack
of innovation, poor service delivery, not meeting up with financial
obligations, high level of dishonesty are certain negative occurrences that
might have beclouded the smooth operations of stockbroking firms in Nigeria in
recent times. These occurrences might have contributed to some form of low
performance among these firms. Issues
with transparency in stockbroking firms might also bring about low employee
trust which will also contribute to low
organizational performance. With prevailing sharp practices going on in
stockbroking firms in Nigeria, employees of these firms may no longer trust the
management of their firms and also see their managers as bad influence not only
on their own personal self but also on the country at large.
Organizations
that do not have a culture of information practice might tend not to perform
well. In the case of stockbroking firms,
there have been reported cases of managers not divulging sensitive information
to their employees basically because of the shady deals they get involved in
and when discovered make them become
disrespectful and misbehave at the workplace. This disposition could go
a long way in contributing to the low performance of any firm. However, factors
like leadership styles, employee trust, and information culture have been shown
to influence organizational performance of financial institutions. The extent
to which these factors contribute to organizational performance of Nigerian
Stockbroking Firms is not known yet. Hence, this research work seeks to
establish the influence of leadership styles, employee trust and information
culture on the organizational performance of stockbroking firms in Nigeria.
1.3 Objective of the Study
The
general objective of this study was to investigate the influence of leadership
style, employee trust and information culture on organizational performance of
stockbroking firms in Nigeria. The specific objectives are to:
1. determine the organizational
performance level of stockbroking firms in Nigeria;
2. identify existing leadership styles in
stockbroking firms in Nigeria;
3 find out the level of employee trust
in stockbroking firms in Nigeria;
4. ascertain types of
information culture in
stockbroking firms in Nigeria;
5. determine the influence of leadership
style on organizational performance of stockbroking firms in Nigeria;
6. ascertain the influence of employee
trust on organizational performance of stockbroking firms in Nigeria;
7. determine the influence of information
culture on organizational performance of
stockbroking firms in Nigeria and
8. ascertain the combined influence of leadership styles, employee
trust, information culture on
organizational performance of
stockbroking firms in Nigeria.
1.4 Research Questions
The
research questions that guided this study are as follows:
1. What is the level of performance of
stockbroking firms in Nigeria?
2. What are the existing leadership styles
in stockbroking firms in Nigeria?
3. What is the level of employee trust in
stockbroking firms in Nigeria?
4. What is the type of information culture
prevalent in stockbroking firms in Nigeria?
1.5 Hypotheses
The
level of significance for the testing of these null hypotheses is at 0.05.
The
Four null hypotheses tested in this study are:
Ho1: Leadership style will not significantly
influence organizational performance of stockbroking firms in Nigeria.
Ho2: Employee trust will not significantly
influence organizational performance of stockbroking firms in Nigeria
Ho3: Information culture will not significantly
influence organizational performance of stockbroking firms in Nigeria
Ho4: Leadership style, employee trust and
information culture do not jointly influence organizational performance of
stockbroking firms in Nigeria.
1.6 Scope of the Study
This
research considered various leadership constructs that would determine the type
of leadership style (transformational and transactional) that existed in
stockbroking firms in Nigeria. Alongside the level of employee trust (openness
in communication, fair dealing with employees, honesty in keeping to promises,
positive intention to employees and belief in management/supervisors) existing
among employees and their superiors. Also, with information culture in form of
information integrity, information control, information informality,
information pro-activeness and information transparency of stockbroking firms
engender improved performance in form of
innovation, employee satisfaction, teamwork, effective service delivery
and perceived profitability which are non-financial indices of organizational
performance.
Non-financial
indices are considered best suitable to measure performance in this study due
to the fact that stockbroking firms basically do not engage in any form of
production or manufacturing processes rather they only engage in buying and
selling of stocks where they make most of their profits. Employees of
stockbroking firms are of two cadres: non-professional and professional level
cadres. The non-professional cadre consists of personnel such as drivers,
clerks, front desk officers, security personnel and cleaners. The professional
cadre consists of accountants, stockbrokers, marketers and managers of the
firm. This study will make use of the professional cadre of the firms excluding
the managers. This is due to the fact that employees at the professional cadre
are in a better position to determine the outcome of various variables this
study seeks investigated. Though every stockbroking firm situated in each state
of the country carries out day to day transaction on behalf of clients, their
operational offices being the headquarters of these firms, are where vital
decisions are made and they are mostly concentrated in Lagos State, South West,
Nigeria. This operational offices in Lagos state however served as the geographical scope for the study.
1.7 Significance of the Study
The performance of stockbroking firms in the
country's economy hinges on the leadership style, trust level and information
culture existing in this kind of firm. The outcome of this study would
potentially include: bridging the gap in literature between leadership style,
information culture, employee trust and organizational performance of
stockbroking firms to support research in the field of capital market operations. Also this study would serve as information
input for the process of policy formulation by the SEC and the (NSE) towards
positioning the Nigerian equity market in conforming to global practices.
The study would also raise the consciousness of the
SEC and NSE to come up with modalities for promoting, sustaining and restoring
investors' confidence in the Nigerian equity market. Hence, this study provides
stakeholders, employees and regulators of the Nigerian equity market with
knowledge that will support them in designing, implementing and improving
managerial activities of stockbroking firms in Nigeria and finally it
constitutes an explicit knowledge resource in the knowledge-base of Babcock
University for consultation by the university community and other stake
holders.
1.8 Operational Definition of Terms
For the tenacity of this research work the
expressions enumerated here are contextualized and used to mean as follows:
Employee Trust: This refers to the level of mutual relationship that exits
between employees and their superiors depending on certain components such as
openness in communication, fair dealing, honesty, positive intention to
employees and belief in management.
Information
Culture: Denotes behavioral practices created in an organization
to foster the use of information such as information control, integrity,
informality, transparency and pro-activeness.
Leadership
Style: This refers to a
personal trait of behavior displayed by the head of an organization towards his
or her subordinates.
Organizational
Performance: Intangible
assets such as effective service delivery, employee satisfaction, teamwork,
innovation etc. that will enhance the performance of a firm especially from a
non-financial perspective.
Stockbroking
Firm: Refers toan
organization that acts as an intermediary for stock market dealings and
presents stockholders various choice of services in addition to asset guidance
and also buys and sells off equities on behalf of investors.
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