CHAPTER III Research Methodology 3.

1 Research Research is a word or form whereby intellectual task are organized and link with science. For instance, its affiliate in French = recherche, in German = Forschung and Research in English. A number of experts has given their definition of research and these are as follows as cited by Rajendra K (2008): Clifford Woody (n.d) stated that research consists of defining and redefining problems, formulation of hypothesis or proposed solutions, data collection, data evaluation, making eliminations and coming up to a conclusion. Lastly, research involves citing conclusions whether or not its conclusion is fitted in the formulated hypothesis. Whereas Research is defined by Redman and Mary (n.d) as a systematic effort in gaining knowledge which are new to the researcher. D. Sleringer and M. Stephenson (n.d) also defined Research in the Encyclopedia of Social Sciences as a process where concepts or symbols are manipulated in order to arrive at a correct generalisation or to verify knowledge that may rather or not end in theory construction or in art practice. Meanwhile, John W (n.d) also cited his own definition of research as an analysis systematically and objectively and recording controlled observations that may lead for the development of its conclusions, theories or principles results in predictions. Another definition of Research is provided by the Webster's Twentieth Century Dictionary stating that research is described as patient, careful, systematic diligent analysis in the field of knowledge undertaken to organize facts or principles. Lastly, Advance Learner's Dictionary of current English defined Research as a careful investigation or inquiry in the event of research period for new facts and any branch of knowledge. Research, is somehow a search for truth through a series of studies, observation, comparison and experimentation. For short, an inquiry for knowledge through the use of methods that is systematic and objective to be able to arrive at a solution of the problem. Furthermore, it is a system of approach denoting to conclusion and theory formulation. An analysis of the above mentioned definitions contributed by the different authors, common characteristics of research definitions is drawn and these are as follows:

 Research is a systematic inquiry Is an investigation on a specific body of knowledge or subject It is the establishment of principles or facts Lastly, research derived from original contribution to current field of knowledge that may lead for its advancement. Rajendra K (2008) 3.2 Research Approach: Alan B (2008) stated that up to this point, he had to write theory that guides and influences the collection and analysis of data. In short, theoretical considerations are needed to be able to arrive at the right solutions or answers to the problems through an appropriate research approach. There are two types of theories or approaches stated by the author and discussed in turn in this section. It is very significant in analysing collected data through its own technique and these are classified as: Deductive Approach and Inductive Approach. According to Norman B (2010), Inductive approach starts with the collection of data and then proceeds to derive conclusions using some kind of inductive logic. This aims to describe social characteristics and the nature of regularities, or networks of regularities in social life. This approach is essential for answering 'what' questions but rather limited in its capacity to answer 'why' questions. Whereas in Deductive approach it cannot be used to answer 'what' questions but is used exclusively for answering 'why' questions. Hence, it adopts a very different starting-point to the Inductive approach and is concerned with explaining some social regularity that has been discovered and which is not understood. Through this approach, the researcher has to formulate a possible explanation, a theoretical argument for the existence of the behaviour or the social phenomenon under consideration. The task is to test that theory by deducing one or more hypotheses from it, and then to collect appropriate data. Therefore, Deductive approach is applied in this study since it tends to predict and validate theoretical hypothesis and observation based from the gathered data from financial statements of selected firm in relation to capital structure and profitability of SME's in the UK. The researcher will be conducting a test to be able to explain the relationship of capital structure to profitability whether or not if the choice of capital structure has an impact on profitability. 3.3 Research Philosophy Blaikie (1993) made an argument that this aspect is highly significant to social

science the fact that a constituent of 'free will' has been introduced through classical element which is described with complexity as can be seen in the natural sciences like for instance as Hatch and Cunliffe (2006) suggested that the existence of variant paradigms may motivate researchers to study phenomena in several methods, leading to a number of organisational phenomena from three variety of perspectives such as the Positivism, Interpretivism and Realism. Likewise, a debate cited by Denzin and Lincold (2003) and Kvale (1996) on emphasising on how these different positions can affect academics. These three paradigms are discussed briefly to be able to distinguish its differences from each other and at the same time it helps the researcher to identify and clarify what research design would fit the study. 3.3.1 Positivism According to Colin F (2010) positivism is referred as the scientific study of human beings, their actions and institutions objectively and emphasising on tangible things. For instance, Behaviourism an approach under positivism is being use by psychologist to study human behaviour. However, positivism has an intention of producing general laws (often called 'covering') to be able to predict behaviour, at least in terms of probability, if not with absolute certainty. These general laws would form an open and orthodox body of knowledge, and this positivist method could be the standard approach for all scientific endeavours. It has been assumed by the author that this positivist is considered as a traditional social science; however, Tilley (1980) expressed his argument on this assumption stating that even without taking a fully fledged positivist stance is that there is still a possibility to have a scientific social science objective. Therefore, it is invalid to perform a hard scientific approach in some cases like the mathematical models of crowd behaviour in shops and stadiums and models of market behaviour. However, problems can be encountered on this method, it does not predict the behaviour of an individual rather it only predict the average behaviour since there are important situations in an individual that is relevant to the study. Another issue is that it provides variety of choices and assumptions to develop this method that often lead its door for the researchers' preferences and values to enter into the research process. A number of researchers argue that research towards the social and institutional world cannot be value-free and for a social researcher who has an aspiration of becoming a hard scientist such as chemist is not possible to achieve through this method as stated by Robson (2002). In my opinion, this method is not applicable to adopt an extreme positivist stance for

this research since this research requires topredict the behaviour of each individual sector of SME's in UK and not the average predictions of the industry as a whole in the UK. The fact that individual sectors reflects their uniqueness as an individual and posses only a slight chance of similarity with each other. Therefore, this is not the method to be a field of focus. 3.3.2 Realism Colin F (2010) also recognises realist research to have retained a number of the positivisms ambitions and classified it as having a subjective nature of research and the role of the values in it are known to be inevitable. This is a method that aims to be scientific but there are fewer authors who claims realism will provide a perfect image of the study. Van de Ven (2007) also claims that realist researchers are known to be ontological realists the fact that objective reality is existing and also have a subjective epistemology although our human subjectivity is subject to distortion based on our knowledge of reality. Realist researcher seek to offer generalisable explanations but they are likely (than positivists) to offer predictions. Since this is more subjective, Tilley (1980) argued (based on the writings of Karl Popper page52), that bias or prejudice is inevitable. However, objectivity is still possible due to the explanations that researchers propose are only provisional and become the subject of scrutiny and testing by other researchers. This is possible for this study (finance research). 3.3.3 Interpretivism

This is also known as phenomenology as it is commonly used in many textbooks according to Orlikoswki and Baroudi (1991), Walsham (1995), Darke et al., (1998); Varey et al.,(2002). This approaches an understanding of reality such as the interpretation of reality, other people's interpretation and the compromises and agreements that arise out of the negotiations between the first two. According to Colin (2010), this attempts to understand the processes by which we gain knowledge because it does not accept the existence of an orthodox or standard interpretation of any particular topic. Therefore, this emphasises, plurality, relativism and complexity. Interpretivism is not suitable for finance research work but it can be the basis of fascinating projects such as: action research which seeks to understand things by changing them, experimenting, and studying the consequences of the action and using them to reflect on one's values and preconceptions before taking new action.

3.4

Research Strategy

Research strategy is defined by Mark W (2003) as a general approach to the investigation of the research. Different methods of data collection can be use to whatever research strategy is selected. Therefore, research strategy has a significant relationship in the accomplishment of the entire research work. There are two cited Research Strategy to choose on and these are: Qualitative and Quantitative Research. These are to be discussed in turns. Qualitative research is the demonstrable effort to produce detailed descriptions and interpretations of people and the social linguistic, material, and other practices and events that shape and are shaped by them. Quantitative research, is differentiated by Neil S (2010) from Qualitative research as a studies produce results that can be used to described or note numerical changes in measurable characteristics of a population of interest; generalize to other, similar situations; provide explanations of predictions and explain causal relationship. Therefore, Quantitative research is to be applied on this research as it allows the researcher to perform a collection of data to a selected 15 SME's located in UK. Through the use of this strategy, the researcher will be able to evaluate the capital structure being used by SME's whether or not, if its choice has an impact on profitability through financial ratio analysis. Through financial reports, samples are to be measured, evaluated or validated. This research also requires mathematical modelling which is applied in quantitative research. 3.5 Data Collection

On this research, secondary data that are published is use as an approach of data collection. Ghauri and Grohaugh (2002) stated that there is a huge level of convenience in gathering data and information on secondary resources as it saves time and effort compared to primary resources in a form of a questionnaire and interview. Published data, ass secondary source, minimises the problem of acquiring an adequate respondents and it enables the researcher to analyse data at a large volume. Quality of the data is also an important aspect in the research which is usually seen in a published data. For instance, federal agencies have a large staff that trained to plan large-scale surveys, write a data collection instruments, conducts surveys and clean the data. Secondary data are often well documented, example: the centre for Disease Control and Prevention, which is a branch of the U.S. National Institutes of Health, issues many technical reports describing their data sets and the methods by which the data were collected and processed.

However, secondary data might not be applicable for a particular research. In cases when having to use what is available and not what the researcher actually needed for a desired analysis. Another problem that can be present when working on secondary data is that when important information might be missing. Incase when data of smaller projects are not conducted and is not at all readily available for the researchers to use. Unlike in primary data, the researcher can acquire a firsthand collection data for a particular purpose. Secondary data may never be useful when time frame required for the research is not publish especially in dealing with historical financial data or the most recent ones. This is very important in calculations of ratios to be able to determine the comparison of the most recent years to that of the current year. Since, Buglear (2001) suggests that data that are published are known to be historic just has a few room for this research. Regardless of its disadvantage, secondary data was used as the source of data for this research the fact that it provides more benefit for this type of a research work. With the use of empirical research from those data that are published, it will lead for confirmation of propositions theoretically which saves time but the validity remains and at the same time it includes whether there is an existence of relationship between the independent variable and dependent variable. In this research, data are collected from the internet, data bases like FAME, journals, articles and textbooks. Fame provides financial information of millions of companies in Ireland and the UK which are comprehensive enough for a researcher to facilitate. Base from the website: www.bvdep.com, FAME contains 7 million companies in a detailed format and 200,000 companies is listed in a summary format in the UK and Ireland by the Bureau Van DIJK electronic publishing company as the developer. This database provides financial information of different companies in a detailed format for 10 years coverage, indicators of financial strength, original images/filings filed at the Companies Registration Office in Ireland and House of the Companies, corporate structures in detailed, shareholders and market research. Moreover, it contains financial analysis on a company, current business and company news such as classifying the company's rank in terms of profitability, also the companys acquisition and merger matters. Software provides a number of advantages since they are updated, comprehensive and has a convenient use aside from its flexibility. However, for mathematical calculations of this research, Microsoft word is used for analysis. In data analysis, a combination of basic and complex approaches on statistic is adopted. Different four sectors of SME's in the UK is being used in the analysis and the manner of selection actually depend on the availability of data. Representative of

four selected sectors such as: fast consumable retail firm, construction business, services, and manufacturing firms were selected over a period of two years 20092010. Financial statements were the data needed for analysis which consists of their trading credit, profit and loss, total equity and financial ratios through FAME. 3.6 Ethical Issues

No one can act alone in the name of all and no one can accept the anarchy of a society without rules In view of this quote, every individual's action and decision always link with particular rules. These rules are always guided with ethics as they may have an impact on the results of our actions such in doing research. Ethical concerns are felt at the level of the practising scientist and are the focus of scholarly attention in the field of research ethics. In human research, always involves a group of individuals, a researcher, if not entire disciplines, singles out another group for study and this individual group may know much less about the research and why they are selected. This creates an imbalance of power in a subordinate position. These groups are vulnerable to a number of ethical and legal issues to which a researcher must respond when doing research. Informed consent rules are the most common response to this problem of vulnerability especially in cases of controversy that will surely damage an individual's moral and dignity just like for example, topics on HIV patients. It is the responsibility of the researcher to provide a clear account of what might be in store for anyone who might serve as a subject. However, this research does not require an informed consent as the topic is not that controversial since its main concern is on the financial aspect that analyses its profitability and it will never affect its company's moral aspect. Another ethical issue to be considered is the standards and relativism. This is relatively related on whether or not such research is possess one moral truth or many truths. This question is of particular concern for researchers when there is a doubtful area in ethical guidelines, that is, when a code of ethics does not appear to offer clear, explicit recommendations. Researchers must decide which course represents the best compromise between their objectives and the interest of their subjects. Some commentators see the problem of ethical relativism in dilemmas like these. And although not everyone accepts the label of relativism with some preferring to speak of moral pluralism or even flexibility instead, most agree that the underlying problem bears on decisions about the design and conduct of research.

Conflicting interest is also one concern in doing research. This can be avoided through the involvement of the government by implementing a law that protects the subjects and society from harm. Granting agencies are also expected to limit support for research that might create a conflict of interest or even give the appearance of one. In that respect, the researcher must perform a type of moral triage, where certain conflicts of interest are quickly dealt with or avoided and others are treated on an ongoing basis as part of the research process itself. These are just among the commonly ethical issues affecting research and they are indeed very significant in doing research as this affects the general outcome of the study. 3.7 Limitations

There are two main problems that the researcher encountered during the research. Firstly, the time frame needed to accomplish this research particularly in gathering data, organising and analysing the gathered data. It requires a huge amount of time to perform this task to be able to obtain an adequate information and data for this research or else the research result will never be accurate and reliable. Another is the availability of data for a period of five years from which some of the entries are missing for a particular element. There is numerous numbers of companies for SME in UK to select but the main problem from the data collection is that some of the most important entry is not stated and it would not be reliable to take that company. Aside from that, some companies have a complete financial entry but then it only covers a shorter number of years. In which case, there should have been more companies selected for these research if not because those stated problems encountered. Problems from the library can also be another problem that a research usually could not be avoided. Databases are not accessible in some libraries and there are no good and sufficient books to be use. However, some libraries are accessible to gather information from databases but only a limited number of companies are allowed to be saved in the USB device. In that case, an expensive photocopier is the alternative to be able to have a copy of those relevant data. In times when data are copyright, the last remedy is to spend the whole day in the library copying manually at a limited time since the library needs to be close soon. FAME is very accessible and relevant information is provided for the researcher. Nevertheless, problems is also experienced that it suddenly went off line in the middle of data collection. According to the system, FAME only allowed four users at a time and it immediately log off without further notice. FAME allows an

unlimited use only for a subscriber individual. Since the researcher access FAME for free through library, the researcher will just have to wait for any existing user to log off before it can be use by any individual. However, FAME is still considered to be the main key to obtain data and this is the easiest means of gathering comprehensive, reliable and systematic pool of variable for analysis. There are no other stated problems experienced by the research aside from the above mentioned.