Question 2

Read the following case extract and answer ALL questions that follow.

A management researcher is compiling a list of practices of managers that he thinks correlate with improved return on shareholders' equity. He suspects that the average number of peer-reviewed articles read weekly by the Chief Executive Officer (CEO) of a JSE-listed company could predict the return on shareholders' equity (ROE, measured in %). To test the veracity of his suspicion, he e-mailed a validated questionnaire to 200 CEOs of JSE-listed companies and received back 127 questionnaires of which 120 were usable (see Table 2.1, below). Table 2.1, below, is an excerpt of the data gathered from the 120 CEOs. Each row in the table shows the number of peerreviewed articles read weekly by CEO and the return on shareholders' equity of the JSE-listed companies of which the CEO is the leader. Table 2.1: Excerpt of data gathered from 120 CEOs of JSE-listed firms.

Respondents'#	Average of peer-review article read weekly by CEO	Return on Shareholder's equity (REO in, %)
1	4	12,50
2	1	10,42
3	5	18,0
4	6	22,75
5	8	27,16
6	3	17,85
7	2	9,21
8	7	31,8
9	1	6,62
10	3	12,22
11	5	14,8
12	3	9,50
13	4	12,26
14	4	16,50
15	5	18,64
...	...	...
120	6	19,5

With the help of a data analyst, the CEO conducted the analysis of the data using IBM SPSS Statistics version 25 and the following output was generated:

Table 2.2: Test of Normality of ROE

Table 2.2 Test of Normality of REO
	Tests of normality
	Kolmogorov-Smirnova	Shapiro-Wilk
	Statistic	df	Sig.	Statistic	df	Sig.
ROE	0.098	120	200	0.973	120	0.167

a. Lilliefors Significance Correction Table 2.3: Correlation of Average Number of Articles Read - ROE

	Correlations
	Average number of articles read	ROE
Average number of articles read Pearson	1000	799**
Correlation		000
Sig.(2-tailed)
N	120	120
ROE Pearson	799**	1000
Correlation	000
Sig.(2-tailed)
N	120	120

**. Correlation is significant at the 0.05 level (2-tailed).

Table 2.4: Regression Model Summary of Average Number of Articles - ROE

Model Summaryb
Model	R	R Square	Adjusted R square	Std Error of the
1	0.799a	0.638	0.624	6.992

a. Predictors: (Constant), Average number of articles read b. Dependent Variable: ROE

Table 2.5: Results of ANOVA for the Average Number of Articles Read - ROE model

ANOVAa
Model	Sum of squares	df	Mean Square	F	Sig
1 Regression	1089.416	1	1.089.416	153.919	.000b
Residual	835.185	118	7.0778
Total	1924.601	119

a. Dependent Variable: ROE b. Predictors: (Constant), Average number of articles read

Table 2.6: Regression Coefficients for the Average Number of Articles Read - ROE Model

Coefficients a
	Unstandardized		Unstandardized
	Coefficients		Coefficients
	B	Std. Error	Beta	t	Sig.
1 (Constant)	3.525	1.897		1.935	.041
Average number of articles read	2.498	0.453	.799	6.528	.000

REQUIRED: 2.1 State the aim of the study. (2 marks) 2.2 Identify the Independent (IV) and dependent (DV) variables implicit in the study. (2 marks) 2.3 Formulate the null and alternative hypotheses for the study. (2 marks) 2.4 Based on the output, comment on the strength, direction and significance of the correlation between the independent and dependent variables. Please quote the relevant statistic to substantiate your answer. (6 marks) 2.5 On the basis of the regression output and using the standard reporting format, comment on the relationship between "Average number of articles read" and "ROE". (6 marks) 2.6 State the regression equation of the 'Average number of articles - ROE' model. (2 marks)