Measuring the Value of Financial Information for Commercial Banks

Question: Discuss about theMeasuring the Value of Financial Information for Commercial Banks. Answer: Introduction Background Information is an intangible asset to a company. This calls for critical evaluation of the value it has on the performance of a company. Successful decision making relies on information and thus it is important to analyse the value that information actually has on the ground rather than that it purports to have. The accounting standards do not support the intangible assets to a greater extend and thus this is the case for information within companies (Shehzad and Ismail 2014). There is a gap in the value of information as an intangible asset in the banking sector and thus the research can help in showing the value of information from the accounting perspective and its impact on performance. Information is critical for the success of the company. The information helps in serving two major purposes which are; provision of a common basis of making decisions for customers, producers and the public officials and also the provision of a common basis of undertaking research which helps in improving the banking sector (Macauley, 2005). This study therefore is relevant for the baking sectors in Abu Dhabi since it will serve the two purposes and thus meet organizational goals. Statement of the Research Problem Information is regarded as a valuable asset in the business world. Information is power and is used by organizations to achieve competitive advantage in the industry. The benefits of information in the banking sector are widely known but there is a limited approach when it comes to qualitative quantifying information as an asset (Chen, 2005). When it comes to valuing information, the information storage equipment is quantified to reflect the information that it holds. Therefore, the paper will seek to determine the applicability of asset evaluation method in measuring the value of information as an accounting principle at commercial banks in Abu Dhabi. The Research Questions What is the relationship between the value of information and organization performance? How does one establish the applicability of asset evaluation method in measuring the value of information as an accounting principle? What are the challenges faced when applying information based on accounting principles in organizations? Research Hypothesis Hypothesis 1a0: The value of financial information has a significant impact in the performance of the commercial banking sector in Abu Dhabi Hypothesis 1a: The value of financial information has no significant impact in the performance of the commercial banking sector in Abu Dhabi. Hypothesis 1b0: The asset valuation method has a significant impact when measuring the value of information with regards to the accounting principles Hypothesis 1b: The asset valuation method has no significant impact when measuring the value of information with regards to the accounting principles. Hypothesis 1c0: Intangibles have a significant impact on the value relevance of accounting information: Hypothesis 1c: Intangibles have no a significant impact on the value relevance of accounting information: Value of the Study The study will be beneficial to the investors, researchers, and academia in the business field. This will be achieved through adding more information to the body of knowledge. Students and researchers will be able to benefit from the research during the constant literature reviews on the subject. The findings will be beneficial to banking sector as they can apply the findings in enhancing their operational efficiency and competitiveness. The research paper will entail the following sections; section 2 will focus on the literature review; section 3 detailed research designs and methodology that will be used in collecting the data; Section 4 results and findings and finally section 5 conclusions which will summarize the information. Literature Review The information is of no essence, if value from it cannot be understood. Asset valuation method is essential in determining the value of information. It helps in determining the spread and thus uncertainty surrounding the decision making process. The model of value evaluation indicates that; the spread calculation is important in selecting alternative courses of action of a company. This ensures that decision makers implement the best strategies that are less risky yet have the potential of promoting success ((Macauley, 2005). Asset valuation method provides four major solutions which are; showing the level of uncertainty for decision makers, the stake that decision makers hold by implementing a certain course of action, the cost of obtaining information on decisions and the price of the next best solution (Zarrouk et al., 2017). The value of information therefore relies entirely on the market outcome. In the case the banking sector in Abu Dhabi, therefore, the value of information is the resulting demand compared to the general costs incurred in obtaining the information. This is relevant to non-market goals, but they add to a commercials banks performance (Kumar, 2016). According to Tuffaha et al., (2014), information is raw data for a company and it needs processing to make sense and be applicable. The process of value evaluation therefore helps in refining the raw data into information that can be interpreted easily by the decision makers. There is no specific number which can be attached to the value of information. In the past, the focus has been given to technology rather than the information content of a company. Attempts have also been made towards measuring the quality of information, but there is no specific researches that have focused on valuing information assets that can be applied practically and yet maintain the major standards of accounting (Higson and Waltho, 2009). Information is an asset to the company since it helps in determining future economic benefits of a company. Secondly, information is controlled by the management of a company and thus it allows for changes to be implemented that can grow and develop a company. Lastly, it can be based on past transactions. (Kimouche, 2016) This research, for instance, relies on the previous information the commercial banks in Abu Dhabi to make informed findings that can promote efficient decision making. Research Methodolgy Research Philosophy There are three types of research philosophy they are positivism, realism, and interpretivism. The research will employ interpretivism philosophy because it is inclined towards the realistic aspects that are behind different situations. Interpretivism in this research could help researchers study the relationship between value of financial information and the performance of commercial bank, and then facilitate the use of quantitative analysis in the collected data. Research Approach There are two types of approaches to research they are induction and deduction. The research approach that will be employed is induction. It consolidates the propositions enabling the relationship between vital and similar factor to be displayed. Induction will be used to evaluate the relationship between incremental value of information when compared to the asset based and market approach method. Research Design The cross sectional survey design will be used in the study. This survey is a field of study will concentrate on the commercial banks located in Abu Dhabi to the expediency in terms of time, accessibility, and financial resources available. Data Collection The primary data collection will be used in the research. The data will be collected using structured open ended survey questionnaire. The questionnaire is important because it enables qualitative and quantitative data to be collected from the respondents. Secondary data will be used to complement the primary data in order to ensure that all the research questions are answered conclusively. Sample The sample for analysis will be 4 commercial banks located within the Abu Dhabi region in UAE. Each of the commercial banks will be provided with 25 soft copies of the questionnaire that will be emailed to them. When the respondents complete the questionnaire they will send them back. In other words, a total of 100 questionnaires will be expected to be returned. Prior to sending the questionnaire I will need to seek the permission of the banking management to facilitate me to go ahead with the research. Data Analysis The research that will be conducted is quantitative. Therefore, the data analysis will employ the use of descriptive statistics using Statistical Package for Social Sciences (SPSS version 22.0) and presented through percentages, means, and standard deviations. The inferential analysis which includes regression and correlation will be done to establish the relationship between independent and dependent variable. References Chen, Y., (2005, June). Information valuation for information lifecycle management. In Automatic Computing, 2005. ICAC, 2005. Proceedings. Second International Conference on (pp.135-146). IEEE. Higson, C., Waltho, D., (2009). Valuing Information as an Asset. White paper, SAS, London UK. Kimouche, B. Rouabhi, A., (2016). 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Financial development, Islamic finance and economic growth: evidence of the UAE. Journal of Islamic Accounting and Business Research, 8(1), 2-22.