The Relationship Between Human Resource Management Practices and Organizational Commitment: A Case Study of Banking Sector in Islamabad, Pakistan

The relationship between human resource management practices
and organizational commitment: A case study of banking sector in

Islamabad, Pakistan
Saba Aftab
Dr. Khalid Sohail
Department of Management Sciences
Bahria University, Islamabad
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Contents
CHAPTER 1
1.1 INTRODUCTION ……………………………………………………………………………………………………………………….6
1.2 HRM PRACTICES & OC……………………………………………………………………………….…………….…….…………8
1.3 SELECTION & OC ………………………………………………………….…………………………….…………………………….9
1.4 TRANING & OC ………………………………………………………………………………………….…………….……………….9
1.5 PERFORMANCE & OC………………………………………………………………………………………………………………10
1.6 COMPENSATION & OC………………………….………………………………………………………………………………..10
CHAPTER 2
2.1 HYPOTHESES…………………………………………………………………………………………………………………………………11
2.2 THEORATICAL FRAMEWORK…………………………………………………………………………………………….…………..12
CHAPTER 3
3.1 RESEARCH METHODOLOGY ………………………………………………………………………………………………………… 12
3.2 RESEARCG DESIGN ……………………………………………………………………………………………………………………….12
3.3 TIME HORIZON………………………………………………………………………………………………….………………………….13
3.4 TYPE OF STUDY ……………………………………………………………………………………………….……………………………13
3.4 POPULATION AND SAMPLING FRAME……………………………………………………………………………………………14
3.5 SAMPLE AND SAMPLING TECHNIQUE……………………………………………………………….……………………………14
3.7 DATA ……………………………………………………………………………………………………………….……………………………14
3.8 QUESSIONAIRE DESSIGN………………………………………………………………………………….…………………………….15
CHAPTER 4
FINDING, ANALYSIS AND INTERPRETATION OF DATA ............................................................................15
4.1 MULTIPLE REGRESSION......................................................................................................................16
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4.2 Linearity..............................................................................................................................................16
4.3 The Assumptions Underlying the Classical Linear Regression Model (CLRM) ...................................16
4.4 PROPERTIES OF THE OLS ESTIMATOR.................................................................................................17
4.5 Investigating Violations of the Assumptions of the CLRM.................................................................17
4.6 AUTO CORRELATION..........................................................................................................................18
4.6.1 METHODS USED FOR AUTOCORRELATION ....................................................................................18
4.6.2 ASSUMPTION OF DW TEST .............................................................................................................18
4.6.3 ANOTHER TEST FOR AUTOCORRELATION: THE BREUSCH GODGREY TEST …………….......................17
4.6.4 CONSEQUENCES OF IGNORING AUTOORRELATION .......................................................................20
4.6.5 DEALING WITH AUTOCORRELATION..............................................................................................20
4.7 MULTICOLLINEARITY.........................................................................................................................20
4.8 WORKING STEPS FOR DIFFERENT HETROSCEDASTICITY SUMMARY..................................................21
4.8.1 GQ Test:...........................................................................................................................................22
4.8.2 BP Test:............................................................................................................................................22
4.8.3 Glegser Test:....................................................................................................................................22
4.8.4 Harvey Test: ....................................................................................................................................22
4.8.5 White Test: .....................................................................................................................................22
4.8.6 Newey and West (1987) Test ..........................................................................................................22
4.9 CHOW TEST........................................................................................................................................22
4.10 STABILITY TESTS BASED ON RECURSIVE ESTIMATION.....................................................................22
4.11 NORMALITY .....................................................................................................................................23
4.11.1 NON NORMALITY ..........................................................................................................................23
4.12 EXPLORATORY FACTOR ANALYSIS (EFA)...........................................................................................23
4.12.1 EXTRACTION VALUE/LOAD FACTOR.............................................................................................23
4.12.2 KAISER MEYER OLKIN (KMO) MEASURE AND BARTELETT.............................................................23
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4.12.3 TOTAL VARIANCE EXPLAINED........................................................................................................24
4.12.4 SCREE PLOT ...................................................................................................................................24
4.13 CONFIRMATORY FACTOR ANALYSIS.................................................................................................24
4.13.1 CONSTRUCT VALIDITY:...................................................................................................................24
4.13.1.1 CONVERGENT VALIDITY:.............................................................................................................24
4.13.1.1.1 FACTOR LOADINGS .................................................................................................................25
4.13.1.1.2 AVERAGE VARIANCE EXTRACTED (AVE)...................................................................................25
4.13.1.1.3 CONSTRUCT RELIABILITIES .....................................................................................................26
4.13.1.2 DISCRIMINANT VALIDITIY ..........................................................................................................26
4.13.1.3 NOMOLOGICAL VALIDITY...........................................................................................................26
4.14 STRUCTURAL MODEL ANALYSIS........................................................................................................26
4.14.1 RELATIVE CHI-SQUARE Relative (CMIN/DF)...................................................................................26
4.14.2 ROOT MEAN SQUARE MEAN ERROR OF APPROXIMATION Root (RMSEA)....................................26
4.14.3 GOODNESS OF FIT INDEX (GFI)......................................................................................................26
4.14.4 ADJUSTED GOODNESS OF FIT INDEX (AGFI)..................................................................................27
4.14.5 COMPARATIVE FIT INDEX (CFI)......................................................................................................27
4.14.6 STANDARIZED VALUES OF ADOPTED GOODNESS OF FIT STATISTICS ...........................................28
4.14.7 DIAGNOSING MEASUREMENT MODEL PROBLEMS.......................................................................28
4.14.7.1 PATH ESTIMATES:.......................................................................................................................28
4.14.8 STANDARDIZED RESIDUALS COVARIANCE ....................................................................................29
4.14.9 RELIABILITY ANALYSIS....................................................................................................................29
4.14.9.1 MEASUREMENT OF CRONBACH’S ALPHA ..................................................................................29
EXCEL DATA ANALYSIS .............................................................................................................................30
MULTIPLE LINEAR REGRESSION ANALYSIS ...............................................................................................31
HETROSCEKARDISCITY..............................................................................................................................32
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AUTOCORRELATION.................................................................................................................................33
EVIEWS DATA ANALYSIS...........................................................................................................................34
CHAPTER 5
VERIFIACATION AND INTERPRETATIONS OF HYPOTHESIS........................................................................48
CHAPTER 6
CONCLUSIONS ..........................................................................................................................................50
REFERENCES.............................................................................................................................................51
CHAPTER 1
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1.1 INTRODUCTION
There are several factors that have been proposed to have impact over OC; among a portion of
those prominent factors are HRM practices. In any case, among the noticeable studies on the said
relationship; the detailed discoveries are conflicting.
OC has been characterized by the researchers in different ways in social science. Meyer and
Allen (1991) characterized that OC is the connection and devotion of the employees towards the
organization. As per Porter et al. (2004), the word commitment indicates the employees feeling
of connection with the organization and readily acknowledgment of the organizational
objectives. In view of these announcements, all in all, OC can be characterized as enthusiastic
relationship of workers with their organization also, their readiness to acknowledge the
guidelines, objectives and need to remain some portion of the organization. In the quickly
developing technological changes now each organization knows the essentialness of the OC due
to its results Omar, Anuar, Majid and Johari, 2012; Paillé, Fournier and Lamontagne, 2011).
Agreeing to Demirel and Goc, (2013); Chughtai and Zafar (2006), OC plays huge role for the
accomplishmentand development of any organization.
At the point when, the employees of organization are committed and willing with the objectives
of the organization, such laborer benefits the organization by putting more endeavors to
accomplish the objectives of the organization (Sial, Jilani, Imran and Zaheer, 2011). Also,
Yurchisin, Park and O‟Brien (2010) focused on that committed worker continuously put more
efforts to perform better in the organization.
Most vital asset of the competitive advantage of any organizations is it's their HR (Huselid what's
more, Becker; 1998). While it comes in the list of creating nations, for example, SOMALI
principle of HR are recognizable one of those organizations with were learning organizations or
innovation organizations. This area has demonstrated the huge execution could be ascribed into
utilized of the technology make a conceivable by its competitive and an advanced HR practice
was the media telecommunication part. HRM practices faces the great challenge of brining great
fitted worker in to organizations and met the organizations desires and needs. Along these lines,
there are convincing demands into growing best thoughts, police into expansive the interface
among workers and employees. What's more, confounded far reaching understanding can help
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human asset the executives got best outcomes and improved employee’s employment fulfillment
(Vigoda and Cohen, 2003). Connections between HRM and OC have gotten wide extensive
consideration from the researchers in the ongoing years (E.g. Perez, 2007; Lin and Chen, 2007).
There is not only a one HRM Practice which an organization tries to hold its employees. There
are distinctive HRM Practices which an organization joins to deal with its HR framework. An
organization ought to continuously join "Number of Best HRM Practices" which they should
actualize for the survival also, manageability of the organization. "Best practices" in HRM are
emotional and passing. They improve interior abilities of an organization to manage present or
future difficulties to be looked by an organization. Great HRM practice likewise invigorates
individuals working in the organization. The dedication and inspiration worked through great HR
practices can prompt hard work. The way of life so fabricated can make a practical and enduring
ability of the organization to oversee itself and not just adapt to the outer choppiness (Aneet,
2006). Great employees should have such attributes as high fulfillment with their organization,
high responsibility towards the organization, high inspiration to serve general society and solid
goals to work for the organization eagerly and devotedly. Sangmook Kim, 2004).
There are distinctive HRM Practices for the organization to receive. HR practices add to the
organization primary concern, regions, for example, recruitment, selection, training,
development and performance appraisal which ought to be reliable, incorporated and deliberately
engaged. Firms need to manufacture long term commitment to hold their work drive. This study
has taken the following combination of Human Resource Practices in the examination:
HRM Practices
1. Training
2. Selection
3. Compensation
4. Performance Appraisal
The strongest and safe banking industry is essential in each country and can have a huge effect in
supporting economic improvement through effective as well as efficient financial services. The
banking sector in Pakistan plays an important role for the growth and development of the
country. A steady and proficient banking sector is a basic precondition to build and increase the
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economic level of any country. Therefore, this study focuses on the banking sector in Islamabad,
Pakistan.
So, this research paper focus on the impact HRM practices on Organizational Commitment of
employees in the banking sector.
1.2 HRM Practices and Organizational Commitment
The researchers have set up into focus on the impact of HRM Practices on the Organizational
Commitment (Malik, 2014). These researchers are suggesting into specific HRM practices would
inspire the several types of the organizational commitment to ward unique target inside firm. The
HRM practices and the strategies has been guidance the impacting of the variables improve
organizational commitment of laborers.
In light of social exchange theory, Charles Ogilvie propose that employees recognition's in the
HRM practice appear into inclination correspondence and the phases of OC into employees
when a worker sense the business care on their welfare and acknowledgment their commitment
(Charles Ogilvie, 2012).
Consequently HRM practices are proposed connection between HRM practices employee’s
commitment and found huge positive relationship with training. For instance, Graetner begin
into participant inside recognition in their organizations product board into security of the
employees, training and in house versatility tell more OC than these who has negative
recognition in their organizational commitment to employees.
So, it examines the relationship between HRM Practices and Organizational Commitment.
Significant correlation and positive were observe and ranging selection, training, compensation,
and performance appraisal.
1.3 Selection and Organizational Commitment
As McElroy explained (2001), the selection of employees is one HRM practice that gives an
effective and clear message to the employees that basically the individuals matter. McElroy
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centers that unnecessary the targeted choice and selection or the selection is standout amongst of
the best, may enlarge effective commitment of the many reasons. Moreover, sees in practices
serve into guarantee that just the individuals who are viewed as fit with the organizational goals
and to society are picked. (McElroy. 2001).
The selection or determination in productive, viable commitment must be improved by the truth
that the picked workers relate to the organizational target, however, McElroy (2001),
furthermore suggested that feel made by being interesting may influence a moral and the ethical
inclination for commitment into new employees. McElroy has contended by means of careful
selection of the people who join their organization; the manager can affirm there are some
congruencies amidst organization and employee in the level of organization commitment may
adequately improve. By coordinating Salancik's model to commitment on the organization
among commitment and outer and interior motives in the procedures of selection of employees
for the employment. The interior inspiration incorporates Inherent on the enthusiasm for the
work, the sentiments of the about claim profession, the obligation of the work and its chance to
advancement (Caldwell and O'reilly. 2008).
1.4 Training and Organizational Commitment
The examinations of the effect of HRM practice and Organization Commitment, at the found
HRM practice have basic and important relationship with organizational commitment (Gear's,
2005).
McElroy (2001), reports, in the expanded of the self-esteem is sense may to be components from
within the training were foreseen into fabricate OC. So McElroy battles the organizations to
place assets into training drive a satisfactory the message in their laborers that the business or
groups are committed the improvement on it is workforce (McElroy, 2001).
At that focuses when the training incorporates specific capacities or abilities may actuate
continuation on the commitments, if on the abilities picked up product see into transferable
(McElroy, 200). For all the training skills could to be effectively migrate to various
organizations, When specific training may result in the arrangement in the indented expense and
terms of the time, and efforts of the employees remain into lose in the event that she/he leaving
the organization.
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1.5 Performance Appraisal and Organizational Commitment
The performance appraisal viability was incorporated from the Chang's (2005), investigation of
the impact of employees' general recognition about the HRM practices of the organization and
OC, it was discovered that the beliefs of the employees that the HRM practices of the association
were successful, brought about higher OC. The effectiveness of performance appraisal was one
of the variables incorporated into the examination alongside the tanning effectiveness, grievance
system, selection, and effectiveness of suggestion system.
Moulder (2001), states that Performance appraisals are esteemed for characterizing desire what's
more, estimating the degree to which desire ate met, she proceeds to express that appraisal can
clarify to employees where they are having achievement and where they have to improve the
performance. Moulder (2001), shows that appraisal are valuable in defining objectives and in
encouraging improved correspondence among work groups and among the employees and
supervisors, previously the 1960's, performance assessment were planned fundamentally as tools
for thr organizations to utilize in controlling the employees (Eichel and Bender; 1981). They
proceed to express the past performance was utilized to direct or legitimize the management's
activities in managing the employees in the organization. At the time, as indicated by these
Eichel and Bender, Performance appraisal gave the premise to compensation, retention,
discharge, or the promotion decisions.
1.6 Compensation and Organizational Commitment

Basically, the term compensation can be portrayed as payment of salaries, wages, bonuses or
reward systems that is utilized by organization to inspire the employees of their organization
(Milkovich and Newman, 1999). These payments are typically founded on the employees' an
incentive to the organization, position at the organization and their general commitment in the
performance of the organization. Along these lines, pay system is one of the manners in which
the organizations motivates their work force and impact their performance which can comprise
of financial installments and non-money rewards that is given to the employees (Huselid, 1995).
Additionally, pay system can come from various perspectives, for example, employees to have
their offer on the benefits, get rewards and motivations, get-aways, going to abroad courses and
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study leaves for them to build up their knowledge. Therefore, this will lead the organization to
create more noteworthy benefits.
CHAPTER 2
2.1 HYPOTHESES
Basically the motivating workforces in the organization into work much efficient and effective
towards the objective of the organization are perhaps the whole basic activity of the
management. Organizations are persuades their employees to perform effectively and effectively
by offering a reward of the adequate and acceptable performances and perhaps punish them of
the unacceptable performances. Laborers are less probable to leave into another test and much
likely into not perform the high levels. Laborers turnovers symbolize one of the basic issues into
the organization in term for misfortune the capable workers, moreover selection and training
cost. The cost a turnover put in many dollars in to the expenses of the organization. Well
including productivity loss, training cost and hiring.
The basic challenge faced by banking sector is to compete with worldwide markets inside the
new restrictions. The banking industry is reacting by presenting new reward components that are
not fixed or ensured like base salary but rather paid as a allowance which can be balanced
relying upon the business performance and the commitment of the person.
Hypotheses1: There is a significant relationship between Selections and OC

Hypotheses 2: There is a significant relationship between Training and OC
Hypotheses 3: There is a significant relationship between Compensation and OC
Hypotheses 4: There is a significant relationship between Performance Appraisal and OC.
2.2 THEORETICAL FRAME WORK
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In this research, dependent variable is Organizational Commitment while independent variable is
HRM practices that are: Training, Selection, Compensation, and Performance Appraisal. This
study adopts a quantitative approach to understand the relationship between HR practice and OC.
HRM Practices
 Compensation
Organizational
 Training
Commitment
 Selection
 Performance Appraisal
CHAPTER 3
3.1 RESEARCH METHODOLOGY

Now, this section explains the methods that are utilize to observe and study the relationship
between HR management practices and organizational commitment. This study adopts a
quantitative approach to understand the relationship between HR practice and OC. At the same
time, organizational commitment have also been considered dependent variable whether they
have impact on the relationship between four HRM practices built-in as independent variables in
this research were selection, Performance appraisal, compensation, and training.
3.2 RESEARCH DESIGN

A plan in which data is collected and utilized to gather desired information is called research
design. In other words, the researcher used a strategic plan used in order to investigate and
answer the research questions. The main objective of this research is to find out the relationship
among HRM practice and organizational commitment. Hence, this is correlation study which
studies the nature of the certain relationship between two or more variables in a situation
(Cavana, Delahaye & Sekaran, 2010). In doing the research, the researcher will use questionnaire
over period of weeks and Months to answer the research questions.
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The banking sector is targeted in Islamabad, Pakistan in this study, the workers perform is an
interdependent rules a clients and work often flexible shift, on the other hand opportunities to
have interact which overall another employees and supervisors in an equal company.
The firm is considered a relevant labor group of workers. Each company is provided copies for
the questionnaires and they returns envelope.
In to ensure a total anonymity, there is no names and no identification number are associate a
survey. So researcher agree this instructed the workers into drop the surveys sealed envelope into
extent, so they disagree or agree any statements like ‘your bank are consider your values and
your goals”.
The research makes use of measures workers perceived organizational included support items
like extent which a respondent could “I would be very happy to spend the rest of my career with
this bank”. The most important part of a research is the first step in collecting information
regarding HRM Practices and frameworks as well as information related to HRM that has
influence on organizational commitment. The information can be obtained from related academic
journals, reference books, articles and other sources from the internet. Besides that the use of
primary and secondary data are also crucial in gaining information related to this research.
3.3 TIME HORIZON

This data were collected different banks of Islamabad namely Allied bank, MCB bank, National
bank, in May 2019 to studying impact of the HRM practices and organizational commitment.
3.4 TYPE OF STUDY

This study is a correlation study which aimed at delineating an important of the variables was
associated with problem. This field was conducted survey through the distribution for the
questionnaires into different banks of Islamabad, Pakistan. Each bank was provided a
questionnaires copies and return into envelopes.
3.5 POPULATION AND SAMPLING FRAME
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Sampling technique used in this research is probability sampling. According to Zikmund, Babin,
Carrand Griffin (2010), probability sampling is a sampling technique in which every member of
the population has a known, nonzero probability of selection. Under this technique, the method
used by is a simple random sampling where every each element in the population will have an
equal chance of being included in the sample. Less time consuming, easily accessible and easy to
measure compared to other sampling technique.
The population of this study comprises of all staffs at different branches banks in Islamabad who
match our specific characters at those banks.
This method will give equal chance to every person in this population to be selected (Fraenkel &
Wallen, 1993). The sample can represent the whole population in banking sector in Islamabad.
3.6 SAMPLE AND SAMPLING TECHNIQUES

In this section, the researcher explains the techniques that are used in formulating the sample that
is used to measure the HRM practices and the relationship between OC among the banking
sector in Islamabad.
3.7 THE DATA

The data were collected from employees of the different banks in Islamabad. The averages for
the workers per bank are seventy employees including supervisors, head departments and
managers, but seventy employees of each bank were participated in this survey.
The researcher used questionnaires as method in having primary data. The best thing about
questionnaires is the anonymity of the respondents which leads to more open and truthful
responses unlike many other techniques.
Nevertheless, questionnaires are also attractive because they are relative low cost and can be
done by the respondent in their preferred time. In doing this research, exactly 490 sets of
questionnaire were distributed by the researcher to the targeted respondent and collected 450 sets
of completed questionnaires. The participation of employees from these banks are based on
voluntarily and confidentiality due to the used of this data for academic purposes only.
Now, I have collected the data from different branches of banks, these are:
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1. MCB bank (main branch)
2. MCB bank (CDA branch)
3. MCB Islamic bank F 10 branch
4. ABL F 11 branch
5. ABL, Bahria University branch
6. ABL Comsatt sub branch
7. NPB (Head office)
3.8 QUESTIONNAIRE DESIGN

The nine-page open and close a questionnaire was developing into gather information about
human resource practices and organizational commitment. The questionnaires are split in to the
three main parts, namely, part one, part two, part three.
Section part one indicates the respondent background. Such the Gender, age, marital status,
highest qualification, years of service and current positions.
Section part two indicates degree of agreement or disagrees of the respondent human resource
management practices.
Section part three indicates how much the degree agrees or disagrees of organizational
commitment.
CHAPTER 4
FINDING, ANALYSIS AND INTERPRETATION OF DATA

Descriptive analysis is utilized to depict the fundamental components of the information in a
study.
This analysis gives a clearer understanding about the sample and the measures. It also
summarizes the data in a meaningful way. Besides that, it frames the basis of every quantitative
analysis of information together with simple graphics analysis such as percentage, frequency
distribution provided by the respondents.
4.1 MULTIPLE REGRESSION

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Multiple regressions analysis is used to define the relationship between variables and to predict
value of the dependent variable (Y) based on value of independent variables (X). Likewise, both
independent variable and dependent variable are metric that is interval scales. Dependent
variable
(Y) is a criterion or a variable that is to be predicted or explained. In this research, the dependent
variable is organizational commitment. Researchers will prove by the data collected about
whether the independent variables have a relationship with the dependent variable. Besides, it
also allows researcher to analyze which independent variables have significant relationship with
OC in separately method.
The equation for the following multiple regression is

Y^= B0+B1x1+B2x2+B3x3+B4x4
Where
Y^ is the dependent variable the Sexual Harassment
B0 is constant
B1 is the independent variable Income
B2 is the independent variable Marital Status
B3 is the independent variable Policies
B4 is the independent variable Productivity
4.2 Linearity
In order to use OLS, we need a model which is linear in the parameters (α and B). It does not
necessarily have to be linear in the variables (y and x). Linear in the parameters means that the
parameters are not multiplied together, divided, squared or cubed etc.
4.3 The Assumptions Underlying the Classical Linear Regression Model
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(CLRM)
The model which we have used is known as the classical linear regression model. We observe
data for xt, but since yt also depends on ut, we must be specific about how the ut are generated.
We usually make the following set of assumptions about the ut’s (the unobservable error terms):
• Technical Notation Interpretation
1. E(ut) = 0 The errors have zero mean
2. Var (ut) = σ The variance of the errors is constant and finite over all values ofxt
3. Cov (ui,uj)=0 The errors are statistically independent of one another
4. Cov (ut,xt)=0 No relationship between the error and corresponding x Variate
5. ut ∼ N(0, σ2) – i.e. that ut is normally distributed
4.4 PROPERTIES OF THE OLS ESTIMATOR

If assumptions 1 through 4 hold, then the estimators α^ and B^ and determined by OLS are
known as Best Linear Unbiased Estimators (BLUE).
Where
• “Estimator” – B^ is an estimator of the true value of B^
• “Linear” - B^ is a linear estimator
• “Unbiased” - On average, the actual value of the α^ and B^’s will be equal to the true values.
• “Best”- means that the OLS estimator B^ has minimum variance among the class of linear
unbiased estimators. The Gauss-Markov theorem proves that the OLS estimator is best.
4.5 Investigating Violations of the Assumptions of the CLRM

We will study these assumptions further, and in particular look at:
- How we test for violations
- Causes
- Consequences
In general we could encounter any combination of 3
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Problems
 the coefficient estimates are wrong
 the associated standard errors are wrong
 the distribution that we assumed for the test statistics will be inappropriate
Solutions
 the assumptions are no longer violated
 we work around the problem so that we use alternative techniques which are still valid
4.6 AUTO CORRELATION

Autocorrelation is assumed of the CLRM’s errors that Cov (ui , uj) = 0 for i ≠ j, i.e. This is
essentially the same as saying there is no pattern in the errors. Obviously we never have the
actual u’s, so we use their sample counterpart, the residuals (the u^t’s). If there are patterns in the
residuals from a model, we say that they are auto correlated. The first step is to consider possible
relationships between the current residual and the immediately previous one, ˆ ut−1
4.6.1 METHODS USED FOR AUTOCORRELATION

Durbin—Watson (DW) test: used for first order autocorrelation only
Bruesch-Godfrey (BG) test: used for first as well as higher order autocorrelation only
4.6.2 ASSUMPTION OF DW TEST

• The autocorrelation must be of first order
• The reg model must include an intercept
• Lag dependent variable should not be included as regressor
• Errors must be normally distributed
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The DW test does not follow a standard statistical distribution such as a t , F, or χ2
• CV’s depend upon a) no of obs (T) and b) no of regressors(k)
• The null hypothesis is rejected and the existence of positive autocorrelation presumed if DW is
less than the lower critical value;
• The null hypothesis is rejected and the existence of negative autocorrelation presumed if DW is
greater than 4 minus the lower critical value;
• The null hypothesis is not rejected and no significant residual autocorrelation is presumed if
DW is between the upper and 4 minus the upper limits
4.6.3 ANOTHER TEST FOR AUTOCORRELATION: THE BREUSCH

GODGREY TEST (1978)
It is a more general test for rth order autocorrelation

The null and alternative hypotheses are:
H0 : p1 = 0 and p2= 0 and ... and pr = 0
H1 : p1 ≠ 0 or p2 ≠ 0 or ... or pr ≠ 0
The test is carried out as follows:
1. Estimate the linear regression using OLS and obtain the residuals, u^t
2. Regress u^t on all of the regressors from stage 1 (the x’s) plus
Obtain R2 from this regression.
3. It can be shown that (T-r) R (T-r) R 2ᵡ2(r)
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• If the test statistic exceeds the critical value from the statistical tables, reject the null hypothesis
of no autocorrelation.
4.6.4 CONSEQUENCES OF IGNORING AUTOORRELATION

If it is Present
• The coefficient estimates derived using OLS are still unbiased, but they are inefficient, i.e. they
are not BLUE, even in large sample sizes.
• Thus, if the standard error estimates are inappropriate, there exists the possibility that we could
make the wrong inferences.
• R2 is likely to be inflated relative to its “correct” value for positively correlated residuals.
4.6.5 DEALING WITH AUTOCORRELATION

Since the presence of autocorrelation provides us with inefficient OLS estimators, it is important
to have ways of correcting our estimates.
• Two different cases
• Case 1: When ρ is known
• This method is called Generalized Least square or Differencing Approach
• Case 2: When ρ is unknown
4.7 MULTICOLLINEARITY
This problem occurs when the explanatory variables are very highly correlated with each other.
According to CLRM, there not be exact linear relationships amongst the explanatory variables
i.e. X’s. The problem of multicollinearity is found amongst X’s, when X’s are highly correlated
to each other i.e. correlation coefficients are very close to 1 or to -1.
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4.8 WORKING STEPS FOR DIFFERENT HETROSCEDASTICITY
SUMMARY
4.8.1 GQ Test: divide the data into two parts and run two regressions: Same DV and same IV’s
First run regression on original model and auxiliary regression on second model, for auxiliary
regression the IV’s and DV’s are different for the following tests
4.8.2 BP Test: DV: square of error term, IV’s: same as in original model
4.8.3 Glegser Test: DV: Absolute of error term, IV’s: same as in original model
4.8.4 Harvey Test: DV: Log of (square of error term), IV’s: same as in original model
4.8.5 White Test: DV: square of error term, IV’s: same as in original model plus square of IV’s
and product of IV’s (optional)
4.8.6 Newey and West (1987) Test
The White variance–covariance matrix of the coefficients (that is, calculation of the standard
errors using the White correction for heteroscedasticity) is appropriate when the residuals of the
estimated equation are heteroscedastic but serially uncorrelated.
21
4.9 CHOW TEST
The steps involved are:
1. Split the data into two sub-periods. Estimate the regression over the whole period and then for
the two sub-periods separately (3 regressions). Obtain the RSS for each regression.
2. The restricted regression is now the regression for the whole period while the “unrestricted
regression” comes in two parts: for each of the sub-samples. We can thus form an F-test which is
the difference between the RSS’s.
3. Perform the test. If the value of the test statistic is greater than the critical value from the F
distribution, which is an F (k, T-2k), then reject the null hypothesis that the parameters are stable
over time.
Ho: the parameters are stable over time
H1: the parameters are not stable over time
4.10 STABILITY TESTS BASED ON RECURSIVE ESTIMATION

Two important stability tests, known as the CUSUM and CUSUMSQ tests, are derived from the
residuals of the recursive estimation (known as the recursive residuals).
 The CUSUM statistic is based on a normalised (i.e. scaled) version of the cumulative
sums of the residuals.
 Under the null hypothesis of perfect parameter stability, the CUSUM statistic is zero
however many residuals are included in the sum (because the expected value of a
disturbance is always zero).
 A set of ±2 standard error bands is usually plotted around zero and any statistic lying
outside the bands is taken as evidence of parameter instability.
 The CUSUMSQ test is based on a normalised version of the cumulative sums of squared
residuals.
 The scaling is such that under the null hypothesis of parameter stability, the CUSUMSQ
statistic will start at zero and end the sample with a value of 1.
 Again, a set of ±2 standard error bands is usually plotted around zero and any statistic
lying outside these is taken as evidence of parameter instability
22
4.11 NORMALITY
The Bera Jarque normality test: Bera and Jarque (1981) formalise this by testing the residuals for
normality by testing whether the coefficient of skewness and the coefficient of excess kurtosis
are jointly zero.
• A normal distribution is not skewed and is defined to have a coefficient of kurtosis of 3.
• The kurtosis of the normal distribution is 3 so its excess kurtosis (b2-3) is zero.
• Skewness and kurtosis are the (standardised) third and fourth moments of a distribution.
4.11.1 NON NORMALITY

The Central Limit Theorem, the test statistics will asymptotically follow the appropriate
distributions even in the absence of error normality. Such observations would appear in the tails
of the distribution, and would therefore lead u^4, (kurtosis), to be very large. Such observations
that do not fit in with the pattern of the remainder of the data are known as outliers. One method
to effectively remove those observations is to use dummy variables.
4.12 EXPLORATORY FACTOR ANALYSIS (EFA)

When the new instrument is introduced to measure any concept, it should be checked through
EFA. Followings are the criterias to validate the instrument:
4.12.1 EXTRACTION VALUE/LOAD FACTOR

According to Habing (2003) an item/statement/question having the factor loadings above or
equal to 0.40 considered as practically significant construct
4.12.2 KAISER MEYER OLKIN (KMO) MEASURE AND BARTELETT

The instrument/construct will be statistically valid if the KMO value is greater than 0.50 and
According to Kaiser (1974) if value of KMO lies between 0.8 to 0.9 shows the greatness and
sample is adequate. Bartlett's Test p-value should be significant (<0.05),
23
4.12.3 TOTAL VARIANCE EXPLAINED
This is considered by taking the eigenvalues into account. The factors having eigenvalue greater
than one will be considered much important
4.12.4 SCREE PLOT

This plot shows the eigenvalues and related component numbers. The point where this plot starts
to descend, next coming factors describe less variance.
4.13 CONFIRMATORY FACTOR ANALYSIS

Confirmatory factor analysis (CFA) is another process to validate the instrument. It also checks
the goodness fit of the model discloses the measurement errors in the model In order to check the
validity of the instrument and model fit CFA is used.
4.13.1CONSTRUCT VALIDITY:
It measured variables actually represent the theoretical latent construct which is designed to
measure. It is made up of three components:
4.13.1.1 CONVERGENT VALIDITY: (Factor Loadings, Average Variance Extracted

(AVE) & Construct Reliabilities): The extent to which indicators of a specific construct
‘converge’ or share a high proportion of variance in common.
4.13.1.1.1 FACTOR LOADINGS

The factors loadings are examined first to determine convergent validity. All factor loadings
should be statistically significant (p<0.05), and all loadings should be above 0.5 and some
scholars suggest the it should be greater than 0.40. The value nearest to 1 the better will the
construct. According to Cua et al. (2001) if the load factor is > or equal to 0.40 that will be
included in final survey.
24
4.13.1.1.2 AVERAGE VARIANCE EXTRACTED (AVE)
After finding the factor loadings in acceptable range, Average Variance Extracted (AVE) is
calculated next. Since AVE cannot be computed in AMOS.
4.13.1.1.3 CONSTRUCT RELIABILITIES

Construct reliabilities are another way to measure construct validity. Construct reliabilities are
not computable in AMOS.
4.13.1.2 DISCRIMINANT VALIDITIY

Discriminant validity is used to check the degree to which one construct is different from others.
In order to check out the discriminant validity the value of AVE (Average Variance Extracted) is
compared with respective squared inter-construct correlation estimates (SIC).
25
SIC = Square of the IC
If the value of AVE exceeds, this shows discriminant validity is there
4.13.1.3 NOMOLOGICAL VALIDITY

In order to assess the nomological validity the inter-construct correlations (IC) in the
measurement models are taken into consideration. Inter-construct correlations (IC) in the
measurement models should be significant (<0.05) and direction of relationship should be same
as per the theory; thus, indicating nomological validity.
4.14 STRUCTURAL MODEL ANALYSIS

The structural model is the second part of SEM that demonstrates the direct and indirect
relationship between the variables.
4.14.1 RELATIVE CHI-SQUARE Relative (CMIN/DF)

The chi-square fit index is divided by the degree of freedom. Marsh and Hocevar
(1985) suggested in terms of at maximum 5 and at minimum 2 for the acceptable fit
4.14.2 ROOT MEAN SQUARE MEAN ERROR OF APPROXIMATION

Root (RMSEA)
Byrne (2001) suggested that model fit statistics due to its contemplation of both degree of
freedom and sample size and if it lies from 0.8 to 0.10 then it’s a good fit
4.14.3 GOODNESS OF FIT INDEX (GFI)

Boudreau, Gefen and Straub (2000), GFI test is used for the absolute fit of the model GFI value
lie from 0 to 1 and 1 show the perfect fit. For well-fitted model, GFI should be close to 1 because
the value below 0.90 gives the poor fit.
26
4.14.4 ADJUSTED GOODNESS OF FIT INDEX (AGFI)
AGFI is similar to the theorized model; with no model whose range of fit lies between 0 and 1
whereas AGFI should be above 0.80 for the well-fitted model.
4.14.5 COMPARATIVE FIT INDEX (CFI)

The primary function of comparative fit index is to make a comparison of the observed
covariance matrix and predicted covariance matrix of the model. Thompson, Fan and Wand
(1999) suggested that the heteroscedastic relationship among the dependent and independent
variables is tested by the CFI that varies with the class of the modifier as it is less affected by
sample size. Its range is from 0 to 1 where significant of perfect fit is 1. By rule the recognition
of model, CFI co-efficient needs to be above 0.90 depicting that the given model comes out with
90% of co-variation in data. The best fitness of model if it represents the value of CFI 0.95 or 1
and it is also called normed fit index (NFI) from 0 to 1 where significant of perfect fit is 1. By
rule the recognition of model, CFI co-efficient needs to be above 0.90 depicting that the given
model comes out with 90% of co-variation in data. The best fitness of model if it represents the
value of CFI 0.95 or 1 and it is also called normed fit index (NFI)
27
4.14.6 STANDARIZED VALUES OF ADOPTED GOODNESS OF FIT
STATISTICS
Sr.# Fit indices Ranges and acceptance criteria

1 Relative / Normal chi-square (1.00< CMIN/DF <5.00)
(CMIN/ DF) Best/excellent fit: 1-3
Reasonably acceptable: 3-5
Poor fit: above 5
2 Goodness Fit Index (GFI) (0.90< GFI <1.00)
Best/excellent fit: ≥ 0.95
Reasonably acceptable: ≥ 0.90
3 Adjusted Goodness Fit Index (0.80< AGFI <1.00)
(AGFI) Best/excellent fit: ≥ 0.90
4 Comparative Fit Index (CFI) (0.90< CFI <1.00)
Best/excellent fit: ≥ 0.95
5 Root Mean Square Error of (0.01< RMSEA <1.00)
Approximation (RMSEA) Best/excellent fit: < 0.05
Reasonably acceptable: 0.06 – 0.08
Poor fit: above 0.10
4.14.7 DIAGNOSING MEASUREMENT MODEL PROBLEMS

In addition to evaluating goodness-of-fit (GOF) statistics, the following diagnostic measures for
CFA should be checked
4.14.7.1 PATH ESTIMATES:

The completely standardized loadings (standardized regression weights) that link the individual
indicators to a particular construct. The recommended minimum = 0.7; but 0.5 is acceptable.
Variables with insignificant or low loadings should be considered for deletion.
28
4.14.8 STANDARDIZED RESIDUALS COVARIANCE
Standardized residual covariance is used to check the discrepancies (differences) between
proposed and estimated model. For the model fit purpose, standardized residual covariance are
checked and to find that which item/s is decreasing the model fitness and that items are excluded
from the model for the goodness of fit of the model .The better the fit the smaller the residual,
these should not exceed |4.0|.
4.14.9 RELIABILITY ANALYSIS

The extent of consistency between the numerous measurements of a variable is called as
reliability (Hair et al., 1998). Internal consistency of the scale is measured by reliability analysis
and is most widely used. Cronbach’s alpha is obtained by the Coefficient of Alpha. Its limit is 0
to 1 and data will be reliable if its value is more than or equal to 0.60Reliability analysis is
conducted to measure the internal consistency among the items.
4.14.9.1 MEASUREMENT OF CRONBACH’S ALPHA
29
EXCEL DATA ANALYSIS
30
MULTIPLE LINEAR REGRESSION ANALYSIS
31
HETROSCEKARDISCITY
32
AUTOCORRELATION
33
EVIEWS DATA ANALYSIS
34
MULTIPLE REGRESSION
Dependent Variable: Organizational Commitment
Method: Least Squares
Date: 05/20/19 Time: 15:29
Sample: 1 48
Included observations: 48
Variable Coefficient Std. Error t-Statistic Prob.
C -0.1742589 0.038574 -4.517535 0.0000
SELECTION 0.002519 0.001375 1.831460 0.0740

TRAINING -0.041868 0.090606 -0.462084 0.6464
COMPENSATION 0.331283 0.092104 3.596820 0.0008
PERFORMANCE
APPRAISAL 0.876941 0.125096 7.010160 0.0000
R-squared 0.973049 Mean dependent var 1.168654

Adjusted R-squared 0.970542 S.D. dependent var 0.425032
S.E. of regression 0.072950 Akaike info criterion -2.299760
Sum squared resid 0.228831 Schwarz criterion -2.104844

Log likelihood 60.19425 Hannan-Quinn criter. -2.226101
F-statistic 388.1232 Durbin-Watson stat 1.712272
Prob(F-statistic) 0.000000
The results of the multiple regression states that p < 0.05 which is 0.000000, hence the data is
highly significant.. The value of Dubin Watson is 1.712272 stating there is no autocorrelation
Based upon the significant level the hypothesis results suggests that
H1: There is a significant relationship between Selections and OC.
Selection has significant negative relationship with organizational commitment which the first
human resource practices in this research with stepwise backward. In this study, the model reach
statistics significant (p=0.07 >0.05). Hence, the first hypothesis test of this research is rejected.
i.e. H1 is rejected.
H2: There is a significant relationship between Training and OC.
The result of the multiple regression analysis tested earlier shown that there is significant
negative relationship between training and organizational commitment. Because the model
35
research statistics significant and beta (B=-0.04, p=0.64>0.05). Thus, in this study, this will
reject the second hypothesis of this research, i.e. H2 is rejected.
H3: There is significant relationship between Compensation and OC.
The four hypothesis of this study, the relationship between compensation is tested against
organizational commitment. The results displays that compensation was significant stepwise
backward beta (B =0.33, p = 0.0008<0.05) which means that compensation has significant
positive relationship with organizational commitment. Hence, the third hypothesis test of this
research is accepted. i.e. H3 is accepted.
H4: There is a significant relationship between Performance Appraisal and OC.
The results tells that Performance appraisal has significant positive relationship with
organizational commitment which the fourth human resource practices in this research with
(B=0.87). In this study, the model reach statistics significant (p=0.00<0.05). Hence, the fourth
hypothesis test of this research was accepted, i.e. H4 is accepted.
NORMALITY
H0: The series is normally distributed
H1: The series is NOT normally distributed
As p-value=0.72>0.05, accept H0 at 5%, series is normally distributed
36
ACTUAL FITTED RESIDUAL GRAPH
From the graph, it can be seen that there are several large (negative) outliers; the plot of the
distribution above, the non-normality in the residuals from the OC appears to have been caused
by a small number of outliers in the sample. Such events can be identified if they are present by
plotting the actual values, the fitted values and the residuals of the regression.
37
ACTUAL FITTED RESIDUAL TABLE
In the table the most extreme outlier is obs31 (-0.85850) hence by adding the dummy to obs31
the new normality data is as follows
38
HETROSKEDASTICITY TESTS
Heteroskedasticity Test: Breusch-Pagan-Godfrey

F-statistic 0.114097 Prob. F(4,43) 0.9769
Obs*R-squared 0.504104 Prob. Chi-Square(4) 0.9731
Scaled explained SS 0.292731 Prob. Chi-Square(4) 0.9903
C 0.003670 0.0031871 1.151439 0.2559

SELECTION -3.71e-05 0.000114 -0.326580 0.7456
TRAINING -0.004505 0.007486 -0.601794 0.5505
COMPENSATION 0.000835 0.007610 0.109738 0.9131
PERFORMANCE
APPRAISAL 0.005107 0.010336 0.494143 0.6237

Adjusted R-squared -0.081544 S.D. dependent var 0.005796
As p value is 0.25 which is > .05, we cannot reject Ho; hence we accept Ho, and states that there is no
hetro. This means that we will accept Ho, and conclude that there is no hetro
39
Heteroskedasticity Test: Harvey

C -5.17725 1.019966 -5.075910 0.0000

SELECTION 0.013873 0.036363 0.381518 0.7047
TRAINING -5.609520 2.395801 -2.341396 0.0239
COMPENSATION -3.862357 2.435410 -1.585917 0.1201
PERFORMANCE
APPRAISAL 7.887692 3.307763 2.384600 0.0216
R-squared 0.173375 Mean dependent var -6.352366

Adjusted R-squared 0.096479 S.D. dependent var 2.029302
S.E. of regression 1.928927 Akaike info criterion 4.250137
Sum squared resid 159.9927 Schwarz criterion 4.445054
Log likelihood -97.00328 Hannan-Quinn criter. 4.323796
As p value is 0.07 which is > .05, we cannot reject Ho, hence we accept Ho, and states that there
is no hetro. This means that we will accept Ho, and conclude that there is no hetro.
Heteroskedasticity Test: Glejser

C 0.061108 0.020600 2.96636 0.0049

SELECTION -7.071e-05 0.000734 -0.095410 0.9244
TRAINING -0.065957 0.048388 -1.363101 0.1799
COMPENSATION -0.026490 0.049188 -0.538549 0.5930
PERFORMANCE
APPRAISAL 0.087506 0.066807 1.309842 0.1972

40
As p value is 0.70 which is > .05, we cannot reject Ho, hence we accept Ho, and states that
thereis no hetro. This means that we will accept Ho, and conclude that there is no hetro
Heteroskedasticity Test: White

C -0.003173 0.010450 -0.303671 0.7638

SELECTION^2 -1.841e-05 2.2722e-05 -0.810398 0.4231
SELECTION*TRANING 0.000436 0.002048 0.212674 0.8326
SELECTION*COMPENSA
TION 0.002122 0.002114 1.003718 0.3281
SELECTION*PERFORMA
NCE APPRAISAL -0.001601 0.002316 -0.691460 0.4941
TIME -0.000303 0.000703 -0.430674 0.6915
TRAINING^2 0.014024 0.052739 0.265915 0.7919
TRANING*COMPENSATIO
N 0.010425 0.142324 0.073247 0.9420
TRANING*PERFORMANC
E APPRAISAL -0.048586 0.157165 -0.309138 0.7591
TRANING 0.001779 0.057357 0.031008 0.9754
COMPENSATION^2 -0.067630 0.073228 -0.923545 0.3624
COMPENSATION*PERFO
RMANCE APPRASIAL 0.058767 0.178622 0.32900 0.7442
COMPENSATION 0.0335756 0.030256 1.109712 0.2751
PERFORMANCE
APPRASIAL^2 0.016186 0.125416 0.129057 0.8980
PERFORMANCE
APPRASAL -0.014956 0.064138 -0.233181 0.8178

As p value is 0.99 which is > .05, we cannot reject Ho; hence we accept Ho, and states that there
is no hetro. This means that we will accept Ho, and conclude that there is no hetro.
41
CHOW TEST
Chow Breakpoint Test: 20
Null Hypothesis: No breaks at specified breakpoints
Varying regressors: All equation variables
Equation Sample: 1 48
1.52094347 0.20635529
F-statistic 4299783 Prob. F(5,38) 43450068
8.75640012 0.11918400
Log likelihood ratio 3485619 Prob. Chi-Square(5) 26492991
7.60471737 0.17940811
Wald Statistic 1498914 Prob. Chi-Square(5) 97518136
CHOW FORECAST TEST FOR THE LAST 8 OBSERVATIONS
Chow Forecast Test

Equation: UNTITLED
Specification: Organizational Commitment C SELECTION TRAINING
COMPENSATION PERFORMANCE APPRASAL
Test predictions for observations from 40 to 48
Value Df Probability
F-statistic 1.806650 (9, 34) 0.1031
Likelihood ratio 18.76061 9 0.0273
F-test summary:
Mean
Sum of Sq. Df Squares
Test SSR 0.074030 9 0.0082256
Restricted SSR 0.228831 43 0.005321
Unrestricted SSR 0.154801 34 0.004552
LR test summary:
Value Df
Restricted LogL 60.19424 43
Unrestricted LogL 69.574556 34
Unrestricted log likelihood adjusts test equation results to account for

observations in forecast sample
C -0.069434 0.053254 -1.303823 0.2010

SELECTION 0.001812 0.001395 1.298523 0.2028
TRANING 0.047108 0.094366 0.499203 0.6208
COMPENSATION 0.390110 0.107154 3.640636 0.000844
PERFORMANCE
APPRASAL 0.628155 0.154388 4.068667 0.0002
42
Thus the conclusions from both forms of the test are that there is no evidence of parameter instability
hence it can be concluded that the parameters are stable with respect to these particular break dates.
STRUCTURAL TEST STABILITY TEST BASED ON

REGRESSIVE LEAAST SQUARES
RECURSIVE RESIDUALS
.24
.20
.16
.12
.08
.04
.00
-.04
-.08
-.12
-.16
10 15 20 25 30 35 40 45
Recursive Residuals ± 2 S.E.
A set of ±2 standard error bands is usually plotted around zero and any statistic lying outside the
bands is taken as evidence of parameter instability
43
CUSUM
20
15
10
-5
-10
-15
-20
10 15 20 25 30 35 40 45
CUSUM 5% Signific anc e
Since the line is well within the confidence bands, the conclusion would be again that the null
hypothesis of stability is not rejected.
CUSUM OF SQUARES
1.4
1.2
1.0
0.8
0.6
0.4
0.2
0.0
-0.2
-0.4
10 15 20 25 30 35 40 45
CUSUM of Squares 5% Significance
Since the line is well within the confidence bands, and ranges 0 to 1 the conclusion would be
again that the null hypothesis of stability is not rejected.
44
RECURSIVE ESTIMATES
.3 1.5
.2 1.0
.1
0.5
.0
0.0
-.1
-0.5
-.2
-.3 -1.0
-.4 -1.5
10 15 20 25 30 35 40 45 10 15 20 25 30 35 40 45
Recursive C(1) Estimates Recursive C(2) Estimates

± 2 S.E. ± 2 S.E.
.04 .4
.02 .2
.00 .0
-.02 -.2
-.04 -.4
-.06 -.6
10 15 20 25 30 35 40 45 10 15 20 25 30 35 40 45
Recursive C(3) Estimates Recursive C(4) Estimates

± 2 S.E. ± 2 S.E.
3.0
2.5
2.0
1.5
1.0
0.5
0.0
-0.5
10 15 20 25 30 35 40 45
Recursive C(5) Estimates

± 2 S.E.
45
Eight small figures, one for each parameter, showing the recursive estimates and ±2 standard
error bands around them hence it is bound to take some time for the coefficients to stabilize since
the first few sets are estimated using such small samples. The parameter estimates in all cases are
remarkably stable over time.
RAMSEY RESET TEST
Ramsey RESET Test

Equation: UNTITLED
Specification: ORGANIZATIONAL COMMITMENT C PERFORMANCE
APPRASAL SELECTION TRANING COMPENSATION
Omitted Variables: Squares of fitted values
Value df Probability
t-statistic 2.035759 42 0.0481
F-statistic 4.144315 (1, 42) 0.0481
Likelihood ratio 4.517000 1 0.0335
F-test summary:
Mean
Sum of Sq. df Squares
Test SSR 0.020552 1 0.020551
Restricted SSR 0.22883 43 0.005322
Unrestricted SSR 0.208279 42 0.004959
LR test summary:
Value df
Restricted LogL 60.19424 43
Unrestricted LogL 62.45274 42
C 0.012325 0.098928 0.124592 0.9014

CHAPMAN 0.657047 0.162018 4.055387 0.0002
TIME 0.001867 0.001365 1.367918 0.1786
MULLEWA -0.034064 0.087548 -0.38909 0.6991
GREENOUGH 0.258359 0.095855 2.69537 0.0100
FITTED^2 0.092059 0.045227 2.03575 0.0481
t, F− and χ2 shows that there is evidence for linearity at 5%. So it would be concluded that there
is support for the notion that the linear model for the OC is appropriate.
46
AUTO CORRELATION
Breusch-Godfrey Serial Correlation LM Test:

C 0.007180 0.039376 0.182347 0.8561

PERFORMANCE
APPRASAL -0.015617 0.126367 -0.123591 0.9022
SELECTION 0.000228 0.001398 0.163138 0.8711
TRANING 0.009446 0.091287 0.103479 0.9180
COMPENSATION -0.004601 0.092362 -0.049822 0.9604
RESID(-1) 0.147976 0.157592 0.938982 0.3531
R-squared 0.020560 Mean dependent var 2.42e-16
As P value of LM test is >0.05, so we accept Ho that is there is no auto correlation.

Breusch-Godfrey Serial Correlation LM
Test:
0.503700036 0.77153577
F-statistic 9110795 Prob. F(5,38) 940103
2.983526248 0.70252574
Obs*R-squared 70204 Prob. Chi-Square(5) 50870948
C 0.017793 0.044233 0.402268 0.6897

PERFORMANCE
APPRASAL 0.026078 0.154124 0.169204 0.8665
SELECTION 0.000444 0.001495 0.297031 0.7680
TRANING -0.025738 0.101519 -0.253537 0.8012
COMPENSATION -0.027467 0.105705 -0.259851 0.7963
RESID(-1) 0.166043 0.167648 0.990457 0.3282
RESID(-2) 0.004371 0.168511 0.025945 0.9794
RESID(-3) -0.110135 0.180127 -0.611422 0.54455
RESID(-4) 0.208883 0.177314 1.178043 0.24610
RESID(-5) 0.014578 0.180218 0.080889 0.93595
R-squared 0.062156 Mean dependent var 2.42e-16
As P value of LM test is >0.05, so we accept Ho that is there is no auto correlation.
47
Hence no auto correlation in any of the residual
MULTICOLLINEARITY
SELECTION TRANING COMPENSATION PERFORMANCE

APPRASIAL
SELECTION 1.000000 0.537690 0.805850 0.677854
TRANING 0.537690 1.000000 0.817684 0.928328
COMPENSATION 0.805850 0.817684 1.000000 0.914311
PERFORMANCE 0.677854 0.928328 0.914311 1.000000
APPRASAL
The correlation between different variables is probably sufficiently small that it can reasonably
be ignored. Indicating there is no problem of multicollinearity.
CHAPTER 5
VERIFIACATION AND INTERPRETATIONS OF

HYPOTHESIS
Moreover, the research investigated on how HRM practices influence organization`s people and
its performance. In the analysis shown in previous chapter those data indicated that human
resource practices have positive relationship with organizational commitment, since selection,
training resulted significant relationships with organizational commitment in banking sector.
Examine the relationship between Selection and organizational commitment

As for Selection, the objective first of this research, the data analysis of Pearson correlation
illustrated that there is significant negative relationship between Selection and organizational
commitment. Selection has significant negative relationship with organizational commitment
which the first human resource practices in this research with stepwise backward. In this study,
48
the model reach statistics significant. Hence, the first hypothesis test of this research is rejected.
i.e. H1 is rejected.
Examine the relationship between training and organizational commitment

In terms of objective number two of this research, the researcher standard if there is any
relationship between training with organizational commitment. The result of the multiple
regression analysis tested earlier shown that there is significant negative relationship between
training and organizational commitment. Because the model research statistics significant and
beta (B=-0.04, p=0.64>0.05). Thus, in this study, this will reject the second hypothesis of this
research, i.e. H2 is rejected.
Examine the relationship between compensation and organizational

commitment
The compensation has positive relationship with organizational commitment among the different
branches of banks in Islamabad. The third hypothesis of this study, the relationship between
compensation is tested against organizational commitment. The results displays that
compensation was significant stepwise backward beta which means that compensation has
significant positive relationship with organizational commitment. Hence, the third hypothesis test
of this research is accepted. i.e. H3 is accepted.
Examine the relationship between Performance Appraisal and organizational

commitment
Objective number four of this research, there is a direct relationship between performance
appraisal and organizational commitment, the data analysis of Pearson correlation illustrated that
there is significant positive relationship between performance appraisal and organizational
commitment. So, Performance Appraisal relationship with organizational commitment among
banking sector in Islamabad, Pakistan. The results tells that Performance appraisal has significant
positive relationship with organizational commitment which the fourth human resource practices
in this research with (B=0.87). In this study, the model reach statistics significant. Hence, the
fourth hypothesis test of this research was accepted, i.e. H4 is accepted.
49
CHAPTER 6
CONCLUSIONS
This study gives a researcher a stage to practice the knowledge researcher accumulated from this
research in his course and actualize it. Consequently, this will give the researcher the certainty as
well as confidence that he needs in future for industrial and academic purposes. The banking
system in Pakistan can increase some data from this study that is essential for them to recognize
the HRM practices that influence their workers' performance. This research seeks into made
triple commitment into huge research on contemplating HRM practices and organizational
commitment. A sort for these researchers was into examined impact of HRM practice and the
basic once, the tools that made the workers all the more much board of trustees in their
organization, and turn should influence workers aim to leave or to remain the organization.
Also, this study can add to body of information that is available as of now in the region of HRM
practice and responsibility as well as commitment into the organization. It might be valuable to
have a progressively broad view so as to understand the methodologies to be conveyed in order
to improve a dimensions of it is organizational commitment. Ideally this study should be
helpfully resources of the data the future researchers in regards to this theme.
50
REFERENCES
 Şendoğdu, A. A., Kocabacak, A., & Güven, Ş. (2013). The relationship between human
resource management practices and organizational commitment: A field study. Procedia-
Social and Behavioral Sciences, 99, 818-827.
 Wright, P. M., & Kehoe, R. R. (2008). Human resource practices and organizational
commitment: A deeper examination. Asia Pacific Journal of Human Resources, 46(1), 6-
20.
 Lamba, S., & Choudhary, N. (2013). Impact of HRM practices on organizational
commitment of employees. International Journal of Advancements in Research &
Technology, 2(4), 407-423.
 Shahnawaz, M. G., & Juyal, R. C. (2006). Human resource management practices and
organizational commitment in different organizations. Journal of the Indian Academy of
Applied Psychology, 32(3), 171-178.
 Ahmad, A., Bibi, P., & Majid, A. H. (2016). Co-worker support as moderator on the
relationship between compensation and transactional leadership in organizational
commitment. Journal of Economic & Management Perspectives, 10(4), 695-709.
51

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The Relationship Between Human Resource Management Practices and Organizational Commitment: A Case Study of Banking Sector in Islamabad, Pakistan

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The relationship between human resource management practices

and organizational commitment: A case study of banking sector in

Dr. Khalid Sohail

Department of Management Sciences

Bahria University, Islamabad

1.1 INTRODUCTION ……………………………………………………………………………………………………………………….6

1.2 HRM PRACTICES & OC……………………………………………………………………………….…………….…….…………8

1.3 SELECTION & OC ………………………………………………………….…………………………….…………………………….9

1.4 TRANING & OC ………………………………………………………………………………………….…………….……………….9

1.5 PERFORMANCE & OC………………………………………………………………………………………………………………10

1.6 COMPENSATION & OC………………………….………………………………………………………………………………..10

2.2 THEORATICAL FRAMEWORK…………………………………………………………………………………………….…………..12

3.1 RESEARCH METHODOLOGY ………………………………………………………………………………………………………… 12

3.2 RESEARCG DESIGN ……………………………………………………………………………………………………………………….12

3.3 TIME HORIZON………………………………………………………………………………………………….………………………….13

3.4 TYPE OF STUDY ……………………………………………………………………………………………….……………………………13

3.4 POPULATION AND SAMPLING FRAME……………………………………………………………………………………………14

3.5 SAMPLE AND SAMPLING TECHNIQUE……………………………………………………………….……………………………14

3.7 DATA ……………………………………………………………………………………………………………….……………………………14

3.8 QUESSIONAIRE DESSIGN………………………………………………………………………………….…………………………….15

FINDING, ANALYSIS AND INTERPRETATION OF DATA ............................................................................15

4.1 MULTIPLE REGRESSION......................................................................................................................16

4.4 PROPERTIES OF THE OLS ESTIMATOR.................................................................................................17

4.5 Investigating Violations of the Assumptions of the CLRM.................................................................17

4.6 AUTO CORRELATION..........................................................................................................................18

4.6.1 METHODS USED FOR AUTOCORRELATION ....................................................................................18

4.6.2 ASSUMPTION OF DW TEST .............................................................................................................18

4.6.4 CONSEQUENCES OF IGNORING AUTOORRELATION .......................................................................20

4.6.5 DEALING WITH AUTOCORRELATION..............................................................................................20

4.8 WORKING STEPS FOR DIFFERENT HETROSCEDASTICITY SUMMARY..................................................21

4.8.3 Glegser Test:....................................................................................................................................22

4.8.4 Harvey Test: ....................................................................................................................................22

4.8.5 White Test: .....................................................................................................................................22

4.8.6 Newey and West (1987) Test ..........................................................................................................22

4.9 CHOW TEST........................................................................................................................................22

4.10 STABILITY TESTS BASED ON RECURSIVE ESTIMATION.....................................................................22

4.11 NORMALITY .....................................................................................................................................23

4.11.1 NON NORMALITY ..........................................................................................................................23

4.12 EXPLORATORY FACTOR ANALYSIS (EFA)...........................................................................................23

4.12.1 EXTRACTION VALUE/LOAD FACTOR.............................................................................................23

4.12.2 KAISER MEYER OLKIN (KMO) MEASURE AND BARTELETT.............................................................23

4.12.4 SCREE PLOT ...................................................................................................................................24

4.13 CONFIRMATORY FACTOR ANALYSIS.................................................................................................24

4.13.1 CONSTRUCT VALIDITY:...................................................................................................................24

4.13.1.1 CONVERGENT VALIDITY:.............................................................................................................24

4.13.1.1.1 FACTOR LOADINGS .................................................................................................................25

4.13.1.1.2 AVERAGE VARIANCE EXTRACTED (AVE)...................................................................................25

4.13.1.1.3 CONSTRUCT RELIABILITIES .....................................................................................................26

4.13.1.2 DISCRIMINANT VALIDITIY ..........................................................................................................26

4.13.1.3 NOMOLOGICAL VALIDITY...........................................................................................................26

4.14 STRUCTURAL MODEL ANALYSIS........................................................................................................26

4.14.1 RELATIVE CHI-SQUARE Relative (CMIN/DF)...................................................................................26

4.14.2 ROOT MEAN SQUARE MEAN ERROR OF APPROXIMATION Root (RMSEA)....................................26

4.14.3 GOODNESS OF FIT INDEX (GFI)......................................................................................................26

4.14.4 ADJUSTED GOODNESS OF FIT INDEX (AGFI)..................................................................................27

4.14.5 COMPARATIVE FIT INDEX (CFI)......................................................................................................27

4.14.6 STANDARIZED VALUES OF ADOPTED GOODNESS OF FIT STATISTICS ...........................................28

4.14.7 DIAGNOSING MEASUREMENT MODEL PROBLEMS.......................................................................28

4.14.7.1 PATH ESTIMATES:.......................................................................................................................28

4.14.8 STANDARDIZED RESIDUALS COVARIANCE ....................................................................................29

4.14.9 RELIABILITY ANALYSIS....................................................................................................................29

4.14.9.1 MEASUREMENT OF CRONBACH’S ALPHA ..................................................................................29