Paradigms and Application to the Study

Johnstone (2004) and Bryman (2012) suggest five types of philosophical assumptions that underpin these two paradigms. As shown in Table 4.3, these are ontological, epistemological, axiological, rhetorical and methodological assumptions. First, ontology is concerned with the nature of reality (Saunders et al., 2007). Collis and Hussey (2009) point out that positivists consider social reality as objective and external to social factors. Also, quantitative research measures objectivity using statistical analysis (Molina- Azorin, 2012). In contrast, interpretivists believe that social reality is subjective because it is constructed in a social context. Therefore, multiple realities exist in a situation, such as the researcher’s and the interviewee’s (Creswell, 1994).

This study is conducted in the particular business context and culture of Saudi Arabia. This environment contains an integrated framework including regulators, legislations, firms and stakeholders. One key aspect of this study is to consider the corporate governance practices in the Saudi corporate context. Therefore, a quantitative approach is used to measure the level of corporate governance disclosure and firm financial performance. In contrast, key stakeholders’ perceptions are required to interpret the statistical findings through investigating the level of awareness and appreciation of the importance of corporate governance. This also implicates multiple realities experienced by the practitioners. Therefore, semi-structured interviews are an appropriate choice to support the quantitative findings.

Second, the epistemological issue concerns the question of what is (or should be) acceptable knowledge in a discipline (Bryman, 2012). Epistemological research examines the relationship between the researcher and what is being researched. In this regard, Creswell (2009) states that the researcher should be independent of what he/she researches in this paradigm. Therefore, quantitative researchers attempt to reduce bias by using an appropriate sampling approach, and seek to be objective in carrying out the research process, for example during data collection and analysis.

In contrast, interpretivism limits the distance between the researcher and that being researched (Collis and Hussey, 2009). Thus, qualitative research is different from quantitative research because it allows for closer interaction with human beings in the social context, or observing social phenomena over a long period of time (see Table 4.2).

In this study, corporate governance practices in Saudi Arabia are examined empirically using the firms’ annual reports. This allows the researcher to be independent of what is being researched. In contrast to testing corporate governance disclosure and firm financial performance, exploring the effects of corporate governance reforms requires interaction with practitioners. Therefore, the interpretivist paradigm suggests semi- structured interviews to develop a researcher’s interaction with interviewees.

Third, the axiological assumption underpins the role of values in this study. Saunders et al. (2007) argue that researchers demonstrate axiological skills to express these values as a foundation for making judgments about the research they are carrying out and how they set about doing it. Positivists consider the subjects under study unaffected by their research activities, but there may be some effect after the study is conducted. However, interpretivists believe that researchers should exhibit ethical and moral values (Collis and Hussey, 2009). Therefore, qualitative research is more value-laden and considers research ethics substantially more than quantitative research (Creswell, 2009).

This study constructed a corporate governance index to evaluate firms’ compliance with the Saudi Corporate Governance Code (SCGC) and its impact on financial performance. Thus, the results of this evaluation are expressed in numbers. Other parts of the study investigate the level of awareness and appreciation of good corporate governance practices among key stakeholders; they are not expressed in numbers, but through a descriptive assessment of interviewees.

Fourth, the rhetorical assumption focuses on the language used in the research. Each paradigm has different rhetorical perspectives. The positivism paradigm is usually expressed in impersonal and formal language based on accepted terms, such as relationships and comparisons between variables, where concepts and variables are clearly defined (Creswell, 2009). In contrast, Collis and Hussey (2009) suggest that the interpretive design prefers a writing style reflecting the immediacy of the research and the researcher’s involvement.

Fifth, the methodological assumption is concerned with how research should be undertaken, including the theoretical and philosophical framework and its implications for the chosen methods (Saunders et al., 2007). As shown in Table 4.3, positivism uses a deductive process to test hypotheses based on a cause-and-effect relationship.

Table 4.3: Positivism and interpretivism paradigm assumptions

Assumption Concept Positivism Interpretivism

Ontological The nature of reality.

Reality is objective and singular, separate from the researcher.

Reality is subjective and multiple, as seen by participants.

Epistemological The relationship of the researcher to that being researched.

Researcher is independent from that being researched.

Researcher interacts with that being researched.

Axiological The role of values.

Research is value-free and unbiased.

Researcher acknowledges that research is value-laden and biases are present.

Rhetorical The language of research.

Researcher writes in a formal style and uses the passive voice, accepted quantitative words and set definitions.

Researcher writes in an informal style and uses the personal voice, accepted qualitative terms and limited definitions.

Methodological The process of research.

Deductive process

Study of cause and effect with static design (categories are isolated beforehand) Research is context-free Generalisations leading to prediction, explanation and understanding

Results are accurate and reliable through validity and reliability.

Inductive process

Study of mutual simultaneous shaping of factors with emerging design (categories identified during research process) Research is context-bound Patterns and/or theories are developed for understanding Findings are accurate and reliable through verification.

Source: Creswell (1994, p.5) and Collis and Hussey (2009, p.58).

Before conducting the study, positivists determine the concepts, variables and hypotheses. In the positivist approach, the methodology seeks to develop generalisability that contributes to finding clear predictions, explanations and understandings of some phenomena (see Table 4.3). This requires that the information and instruments remain valid and reliable (Johl et al., 2012). However, interpretivists use an inductive approach where information is generated from groups within data. This provides rich information and theories which help in interpreting social phenomena (Liew, 2007; Collis and Hussey, 2009; Johl et al., 2012).

This study employs both deductive and inductive approaches to explore the influence of corporate governance reforms in Saudi Arabia. Through the deductive process, corporate governance theories, such as agency, managerial signalling, stakeholder and resource dependence theories, are tested. The study also developed hypotheses to explain corporate governance practices. On the other hand, it was necessary to supplement an interpretative part of the study that explores corporate governance in the Saudi corporate context. This helps in developing an understanding of the statistical results. Thus, the qualitative part of this study employs an inductive approach using semi- structured interviews.