Running head: Unit 5-2

Dimitrios V. Siskos
This paper is submitted in partial fulfillment of the requirements for Quantitative Research MethodologyUnit 5-2
SMC University
School of Management
Dr. Ted Sun
February 14, 2013

Table of Contents
Research problem.................................................................................................... 3
Purpose of research.. ............................................................................................... 3
Significance of research.. ........................................................................................ 4
Quantitative Research questions and hypotheses..... ......................................... 4
Research methodology and rationale for its selections.. ................................... 4
Population and sampling strategy.. ...................................................................... 5
Data collection.......................................................................................................... 6
Instrument description and validation.. .............................................................. 6
Statistical analysis methods.. ................................................................................. 7
Ethical considerations.. ........................................................................................... 8
References ............................................................................................................................. 9

Research topic: The value of timely and accurate cash flow predictions in Greek businesses amid global
crisis and their relations to accruals, earnings and investments.
Research problem
Recent economic crisis showed that in such special circumstances, cash flow and high liquidity are
more important compared to sales and turnover. The winner is the one who sells in cash, but Greek reality
shows different trends. In order to be competitive, Greek companies are obliged to bill goods or services on
credit. The problem starts when they have to settle up their own current liabilities earlier than the provided
credit, or by cash. Additionally, according to the Greek laws, businesses have to pay VAT in the first phase,
even for the uncollected transactions. On July 1st 2010 all VAT rates were raised by 10 % (Paris, et al.,
2011), making the situation worse. Consequently, due to delayed receipts and postdated checks, which
considered as being committed funds, many businesses seek short-term borrowings from banks, implying
duties and interests (Fosberg, 2012).
Acting in such a liquid drought, companies lack many options. Both new and well-established
businesses find themselves unprepared to manage a difficult cash situation. However, Subatnieksd (2007)
determined that many businesses started to focus on timely cash flow predictions, in order to manage crisis.
Purpose of research
The necessity of timely and accurate cash flow predictions occurred as a result of the crisis that
afflicted Greece. While previously studies focused on the root causes of the Greek crisis (Mitsopoulos &
Pelagidis, 2011; Paris, et al., 2011), this model presents a way of managing cash flows and thus crisis. The
study seeks to understand each one of the possible relationships between cash flow predictions and a)
accruals, b) earnings and c) investment within Greek business area. These variables interact with cash flow
predictions and should be deeply examined to define the correlated relationships. The study hopes to solidify
those relations by providing statistical evidence of the positive, negative or null correlations.

Significance of research
The significance of this subject is crucial to many fields, including economy, unemployment, society
coherence, development and competitiveness. According to a sample research made by Athens Chamber of
Commerce and Industry (2011), 40% of 120 industry owners doubt whether they could correspond in their
functional and fiscal liabilities and 10% of them would cut jobs position or would apply flexible working
relationships so as to keep business in life.
Quantitative Research questions and hypotheses
Staying at the area of quantitative research, the author seeks to address research questions focusing on
the interrelationships between predetermined variables (Creswell, 2001; Sun, 2009).
The research questions, with their respective hypotheses, are as follows:
R1: Is there a relationship between accruals and cash flow predictions?
H1a: There is a relationship between accruals and cash flow predictions.
H1o: There is no relationship between accruals and cash flow predictions.

R2: Is there a relationship between earnings and cash flow predictions?

H2a: There is a relationship between earnings and cash flow predictions.
H2o: There is no relationship between earnings and cash flow predictions.

R3: Is there a relationship between predicting future cash flow and investment in Greece?
H3a: There is a relationship between predicting cash flow and investment in Greece.
H3o: There is no relationship between predicting cash flow and investment in Greece.
Research methodology and rationale for its selection
The research methodology undertaken is quantitative. Based on the existing literature on a) Greek crisis
(Mitsopoulos & Pelagidis, 2011; Paris, et al., 2011), b) accruals - earnings (Dechow, et al., 1997), c)

investment opportunities (Carpenter & Guariglia, 2003) and cash flow predictions (Pae and Yoon, 2012), the
study aims to give prominence to the possible relationships between these constructs. Similarly, the studies
quoted above used quantitative design to seek further understanding for each of the concepts. The study
instrument is inspired by the one developed by Carpenter & Guariglia (2003). Using ICAP lists of firms and
investors, the data collection starts with an invitation by e-mail with a link to the web survey and continues
with telephone survey. All data are statistically analyzed using descriptive statistics, multiple regression and
correlation analysis. Figure 1 depicts the details of the research design overview.

Figure 1: Research Design

Population and sampling strategy

Similar to the one in the Liargovas & Skandalis (2010) study of business performance in Greece,
ICAPs, a Greek private research company, database list is used to determine the 200 biggest Greek firms

according to turnovers and the 100 biggest investors, both for the year 2010. Due to the differences in the two
populations, it is required to implement two sampling procedures. The first group includes 100 employees
who work in the selected 200 companies, such as financial analysts, and the second 100 individuals who
invest, or are willing to, in Greece. Both will initially receive an invitation by e-mail with a link to the web
survey in order to participate. The population approach will continue with telephone surveys (with a
standardized set of questions). Regarding the first group, the sampling will be snowball, a type of purposive
one (Park, 2006), because some employees may suggest others until the most suitable ones are located. The
second group is very specific, thus purposive sampling will involve individuals who are willing to invest in
Greece and accurate cash flow predictions would factor in their decision.
Data collection
The use of an experiment as primary data collection is quite risky in the field of cash flow predictions,
and it may be discarded by the employees or the investors. Under such circumstances and due to the nature of
the study, the web and telephone survey as the primary data collection strategies is reasonable (Hox &
Boeije, 2005). Both will contribute to approach 100 employees and 100 investors. Organizations like ICAP,
which acquire, archive and disseminate data, will be used for secondary data collection (Hox & Boeije,
2005). Through these, it is expected to determine the 200 biggest companies and the list of 100 biggest
investors.
Instrument description and validation
The instrument is inspired by the one created by Carpenter & Guariglia (2003). That one contains
effects of investment to capital ratio, accruals to cash flow, earnings to cash flow, and cash flow to
employment. The instrument presented construct validity with an average correlational coefficient of 0.357
and a test-retest reliability coefficient of 0.31. Both the J and m2 statistical tests suggested that the
instruments were valid and that there was no gross mis-specification in the model (Carpenter & Guariglia,
2003). This study uses the scales concerning accruals, earnings and investments. The Likert scale will record

responses ranging from 1 (not sufficient) to 7 (very sufficient), representing the reflection of one
variable to another.
Statistical analysis methods
Data analysis will contain three primary components: descriptive statistics, multiple regression and
correlation analysis. As Field (2005) refers, the descriptive statistics are used to process data obtained
through the web-based survey. At first, the analysis will focus on a compilation of simple frequencies,
percentages, and means of the two samples of population (Nalkur, 2010). The demographic data will describe
the samples population in detail with respect to their personal profile like employment status and citizenship,
in order distinguish 100 employees who cope with cash flow predictions and to locate 100 investors.
Multiple regression analysis will be used to determine if there is a linear relationship between the
dependent variable Y (cash flow predictions) and each of the independent variable X (accruals, earnings,
investments) (Nalkur, 2010). The degree to which the predictors (X variables) are related to the dependent (Y)
variables is expressed in the correlation coefficient R. Table 1 illustrates the minimum level which absolute
values of the correlational coefficient should be (with an alpha level of 0.05), so as to consider them as an
evidence of a statistically significant relationship and reject the null hypothesis. Similar to Sun (2011), if the
absolute value of the correlation coefficient is less than this, evidence of no significant statistical relationship
exists, which means that there is no proof of significant correlation between the variables, and the null
hypothesis is accepted.
Research

Independent

Dependent

Correlation

Question

variable

variable

coefficient

R (absolute values)

R1

Accruals

Cash flow

0,950

R2

Earnings

Cash flow

0,460

R3

Investment

Cash flow

0,360

Table 1

Ethical considerations
The study follows APAs ethical principles of psychologists and code of conduct (APA, 2002).Initially,
all email communications will be completely confidential and anonymous (Sun, 2011). In addition, there will
be specific note in the invitation that will inform participants about crucial ethical considerations, in order to
ensure that individuals are voluntarily participating in the research with full knowledge of relevant risks and
benefits (Smith, 2003).
The expected duration of the web survey is 10 minutes and the whole procedure is constituted by two
sets of multiple questions, one for each group. According to Principle E: respect for people's rights and
dignity, the participant has the right to withdraw from the web survey once it has started without any
consequences (APA, 2002). The expected duration of one telephone survey is also 10 minutes, and the
procedure is implemented through a standard set of questions. Following Principle C: integrity, the
participant will be initially informed that this interview will be recorded and processed in a future stage
(APA, 2002). Due the fact that most communications will be made during working hours, professional
standards of conduct and formal behavior will be adhered through the whole procedure. Based on Principle
E: respect for people's rights and dignity, which highlights the necessity of confidentiality (APA, 2002), the
researcher will be trustworthy when needed and tolerant when the participant refuses to indicate other
colleagues.

References
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