The Development and Validation of an Agency Theory Scale for Customer Loyalty towards

195 Pages·2013·3.17 MB·English

The Development and Validation of an Agency Theory Scale for
Customer Loyalty towards Financial Salespersons
TanChiewKweeJon,MasterofApplied Finance
InternationalGraduateSchoolofBusiness
DivisionofBusiness
UniversityofSouthAustralia
Submittedonthismonth ofAugustintheyear2013fortherequirements
ofthedegreeof
Doctorof Philosophy
I declare that this thesis does not incorporate without acknowledgement any
material previously submitted for a degree or diploma in any universityand that to the best
of my knowledge it does not contain any materials previously published or written by
anotherpersonexceptwhereduereferenceis madeinthetext.
Signed
TanChiew KweeJon
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Table of Contents
1 Introduction..............................................................................................................................13
1.1 RoleofSalespersonand AgencyTheory..............................................................13
1.1.1 RoleofSalesperson.......................................................................................15
1.1.2 AgencyTheoryproblems withSalespersons.................................................16
1.2 ObjectivesandContributions................................................................................18
1.3 Organizationof Dissertation.................................................................................22
2 LiteratureReview.....................................................................................................................23
2.1 AgencyTheory......................................................................................................23
2.1.1 GoalAsymmetry............................................................................................24
2.1.2 RiskAsymmetry............................................................................................30
2.1.3 InformationAsymmetry................................................................................36
2.2 CustomerLoyalty..................................................................................................40
2.2.1 AgencyTheoryandCustomer Loyalty..........................................................47
2.3 Word-of-Mouth.....................................................................................................48
2.3.1 TheEffectsofPositiveandNegative Word-of-MouthonCustomerLoyalty49
2.3.2 RelatingAgencyTheoryproblems to Word-of-Mouth.................................50
2.4 Trust......................................................................................................................52
2.5 ScaleDevelopment................................................................................................57
2.5.1 ConflictingViews:Single-itemvs.Multiple-itemScales.............................59
2.5.2 Multi-itemscales maybebetterfor complex constructs................................60
2.5.3 Specificationof MeaningandEpistemologicalRelationshipsbetween
Constructs,Dimensions and IndicatorsintheDomainofAgencyTheory..................63
2.5.4 Churchill’s (1979)Eight-StepProcess..........................................................66
3 ConceptualModelDevelopment..............................................................................................70
3.1 ConceptualModelandHypothesis.......................................................................70
3.2 ConceptualDevelopment......................................................................................72
3.2.1 GoalAsymmetry............................................................................................72
3.2.2 RiskAsymmetry............................................................................................74
3.2.3 InformationAsymmetry................................................................................75
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3.2.4 ModeratingRoleofTrust...............................................................................77
3.2.5 Wordof Mouth..............................................................................................79
4 Research Designand Methodology..........................................................................................80
4.1 Churchill’s ProcedureStep1:SpecifyDomainofConstruct...............................83
4.2 Churchill’s ProcedureStep2:Generatesampleof items......................................84
4.2.1 Developitemsbasedon exploratoryin-depthinquirywithparticipants:Goal
Asymmetry...................................................................................................................88
4.2.2 Developitemsbasedon exploratoryin-depthinquirywithparticipants:Risk
Asymmetry...................................................................................................................93
4.2.3 Developitemsbasedon exploratoryin-depthinquirywithparticipants:
InformationAsymmetry...............................................................................................98
4.3 Churchill’s ProcedureStep3:InitialDataCollection.........................................103
4.3.1 Questionnairedevelopment.........................................................................103
4.3.2 PilotTestforQuestionnaireDevelopmentUsingExpertPanel..................104
4.3.3 Samplesizedetermination-Sample1.........................................................106
4.3.4 FirstDataCollection- Sample1..................................................................106
4.4 Churchill’s ProcedureStep4:Purificationof MeasureandDataAnalyses.......110
4.4.1 ExploratoryFactorAnalysis(EFA)-Itemreduction(Sample1)................110
4.4.2 DataAnalyses..............................................................................................119
4.5 Churchill’s ProcedureStep5:NewDataCollection...........................................122
4.5.1 Samplesizedetermination-Sample2.........................................................122
4.5.2 Second DataCollection- Sample2.............................................................122
4.6 Churchill’s ProcedureStep6:AssessReliability................................................125
4.6.1 ConfirmatoryFactorAnalysis......................................................................125
4.6.2 ReliabilityEstimates....................................................................................126
4.7 Churchill’s ProcedureStep7:AssessValidity...................................................128
4.7.1 ConstructValidity........................................................................................128
4.7.2 DataAnalyses..............................................................................................128
4.7.3 DiscriminantValidity...................................................................................129
4.8 Churchill’s ProcedureStep8:DevelopmentofNorms.......................................132
5 Results ofmainstudy.............................................................................................................134
5.1 Main Study..........................................................................................................134
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5.2 Results ofStructuralEquationModellingforConceptualResearch Model.......137
6 AlternativeResearch Model...................................................................................................140
6.1 ConstructValidityandReliabilityforAlternativeModel..................................140
6.1.1 DataAnalyses (Sample2 dataset)...............................................................140
6.1.2 TestsofGoodness-of-fit forAlternativemodel...........................................143
6.2 SEMforAlternativeResearch Model.................................................................145
7 Discussions.............................................................................................................................148
7.1 TheoreticalImplications......................................................................................149
7.1.1 AgencyProblems inCustomer-SalespersonRelationships.........................149
7.2 ManagerialImplications......................................................................................154
8 Conclusions............................................................................................................................159
9 References..............................................................................................................................164
Appendices.....................................................................................................................................182
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Table of Figures
Figure1.1:U.S.Bureau ofLabour Statistics2012,EmploymentProjections program..................14
Figure1.2:Customeras Principal, Salespersonas Agent...............................................................17
Figure2.1:Threescenariosunderwhichcustomers perceivegoalasymmetrywiththeir
salespersons......................................................................................................................................25
Figure2.2:Threescenariosunderwhichcustomers perceiveriskasymmetrywiththeir
salespersons......................................................................................................................................32
Figure2.3:Twoscenarios underwhichcustomers perceiveinformationasymmetrywith
salespersons......................................................................................................................................38
Figure2.4:Two-dimensionaltypologyofCustomerLoyalty(Dick&Basu, 1994).......................42
Figure2.5:AgencyTheoryproblems directlyaffectCustomerLoyalty.........................................46
Figure2.6: Formativemodel(Bisbeetal.,2007)............................................................................64
Figure2.7:Reflectivemodel(Bisbeetal.,2007)............................................................................65
Figure2.8:Churchill’s8-stepprocedurefor developingmarketingmeasures (Churchill,
1979)................................................................................................................................................66
Figure3.1:Conceptual FrameworkofModel..................................................................................71
Figure4.1:Churchill’s(1979)eightbasicstepsfordevelopinganAgencyTheoryscale..............81
Figure4.2:AScreePlotshowingfour Items measuringAgencyTheoryscale(Sample1
dataset)...........................................................................................................................................114
Figure4.3:28-itemAgencyTheoryScaleConfirmatoryFactorAnalysis....................................125
Figure5.1: Schematicofoverallresearch model...........................................................................135
Figure6.1:Alternative3-factorresearch modelincorporatingacomposite Information
Asymmetry(IA) factor..................................................................................................................140
Figure6.2: SchematicofthestructureofthealternativeATmodel..............................................145
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Table of Tables
Table4.1:Proceduraloutcomesandanalysesforeachdataset(Sample1 &Sample2)................82
Table4.2:Descriptionofindividualsinterviewedincludingthenumberof yearsof
experienceas asalespersonorcustomer..........................................................................................85
Table4.3:Descriptivestatistics forparticipantsin (Sample1).....................................................108
Table4.4:KMOandBartlett’sTestResults on(Sample1dataset)..............................................113
Table4.5:StructureCoefficientsfor11GoalAsymmetry(GA)itemscoresafteraPromax
Rotationwithafactorloadingcut-offof0.364 (Sample1dataset)..............................................115
Table4.6:Structurecoefficientsfor7RiskAsymmetry(RA)itemscoresafteraPromax
Rotationwithafactorloadingcut-offof0.364 (Sample1dataset)..............................................116
Table4.7:Structurecoefficientsfor6Timeliness InformationAsymmetry(IAT)item
scores afteraPromax Rotationwithafactorloadingcut-offof0.364 (Sample1dataset)...........117
Table4.8:Structurecoefficientsfor4QualityInformationAsymmetry(IAQ)itemscores
afteraPromax Rotationwithafactorloadingcut-offof0.364(Sample1dataset)......................118
Table4.9:PearsonCorrelationbetweenConstructs(Sample1dataset).......................................120
Table4.10:SummaryofEFAResultsforthefourfactorsconstructs(Sample1dataset)............121
Table4.11:DescriptivestatisticsforindividualsinSample1and Sample2................................124
Table4.12:Results ofKMO andBartlett’sTest(Sample2dataset)............................................128
Table4.13:PearsonCorrelationCoefficients betweenAgencyTheoryConstructs (Sample
2dataset)........................................................................................................................................129
Table4.14:CorrelationamongAgencyTheoryConstructs(Sample2dataset)...........................130
Table4.15:SummaryofCFAresults forthefour-factor constructs(Sample2dataset)..............131
Table4.16:SummaryofCFAmodelfitmeasures(Sample2dataset).........................................133
Table5.1:SummaryofStructuralEquation ModelEstimates measurements (Sample2
dataset)...........................................................................................................................................137
Table5.2:Summaryofresultsofhypotheses tests(Sample2 dataset)...................................139
Table6.1:Pearsoncorrelationcoefficientsbetweenthe3-factorAlternative-modelAgency
TheoryConstructs (Sample2dataset)...........................................................................................141
Table6.2:Correlationamong3-factor alternative-modelAgencyTheoryconstructs
(Sample2dataset)..........................................................................................................................142
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Table6.3:ComparisonofCFAmodelfitmeasuresfortheconceptualmodelandthe
alternativemodel............................................................................................................................144
Table6.4:ComparisonofSEMestimatesfortheconceptualmodelandthe alternative
model..............................................................................................................................................146
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Acknowledgements
Iamblessed to havebeen helped and supported bymanypeople. With humilityand
gratitude, I thank my dedicated supervisor, Dr Richard Lee, for providing invaluable
guidance as I worked on this dissertation. Dr Richard freely shared his knowledge,
thoughts, experiences, and wisdom as I developed the multiple item scale to measure
Agency Theory and researched the moderating role of trust in agency relationships. His
patience and constant enthusiasm created an excellent learning environment that was
challenging yetenjoyable.
I am also grateful to the Ethics committee, especially Dr Marguerite Kolar for her
advice and assistance in fulfilling the stringent Ethics requirements. Many thanks also to
Ms Chou Tea and other administrative personnel in arranging the logistics necessary for
mymeetings inSingaporewithDrRichard.
Finally, I want to share this achievement with my family in recognition of their
encouragementandsupportthroughoutmylearningjourney.
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Abstract
Many financial service customers lost money in the recent financial crisis (Ball,
2009). While some customers blamed their trusted financial advisors, others questioned the
assurances given by the salespersons employed by trusted banks and other financial
institutions. As reported in a recent newspaper article from Financial Times (London, UK)
dated 20th December 2010, “The financial service industry is still too short term in focus,
lacks good alignment with clients’ interests, and too readily embraces ideas that market
well but add little - or indeed subtract - value.” This dissertation was driven by the
challenges that many customers faced during the recent economic turmoil that were
attributable to problematic customer-salesperson relationships. It attempts to provide
insights into the conflicting roles of salespersons versus customers in terms of personal
motivation, risktaking,ethics, and information.To this end,thisthesis applies a conceptual
model based on Eisenhardt’s (1989) Agency Theory to investigate customers’ loyalty
towards their financial salespersons. A keycontribution of this research is the development
of an Agency Theory (AT) scale incorporating the three asymmetries (goal, risk,
information) found in literature. Such a scale has, to the author’s knowledge, never before
beenpublished.
In developing the new Agency Theory (AT) scale, this thesis uses a positivist
approach and follows Churchill’s (1979) eight-step procedure for developing measures of
multiple-item marketing constructs. Specific elements of the approach involve a
combination of qualitative and quantitative methods. Firstly, following literature review of
studies relevant to this thesis, in-depth interviews with financial services customers and
financial salespersons from private banks or high-end hedge funds generated a list of items
for the three asymmetries. Next, a pilot test with an expert panel modified the initial list of
items, ensuring that the items were measured from a client’s perspectives. Finally, the
prototype AT scale questionnaire was later administered to two separate groups in
Indonesia.The first group (Sample1)was comprised offinancialservices customers, while
the second (Sample 2) was much more diverse, consisting of a random sample of
individuals at a shopping mall. Data collected from the first group (Sample 1) were
analyzed usingexploratoryfactor analysis (EFA) and internalconsistencyanalysis to select
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