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Reasons for choosing this topic

The fundamental reason for choosing this topic is that having searched literature I found that very few works have been conducted concerning firms’ management of interest rate and foreign exchange risk. This fact has encouraged me to do this piece of work in order to contribute to the existing knowledge about this subject by adding a new point of view. Another reason is that most investors are people with poor background in accountancy, so it is so difficult for them to understand contents of annual reports.

In addition to that investors should understand the relationship between risk and return, so that investors evaluating a company’s performance do not focus solely on return, but also on the risk assumed to produce the return. This has urged me to conduct this study in order to show the importance of management of interest rate and foreign exchange risk for the companies. The aim of this research is to examine if the UK firms are successfully undertaking management of interest rate and foreign exchange risk. ? To review the literature about this issue up till now.

? To improve the presentation of risk factors. ? Ensure that companies adequately address the risks of interest rate and foreign exchange rate. ? To help investors assess whether a company’s potential return is an adequate reward for the risks taken. ? Provide an investor with sufficient information about the risk of investing in a company to evaluate whether this company is an appropriate investment vehicle to meet the investor’s personal needs within the available investment time horizon.

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METHODOLOGY PHILOSOPHY Research is a fact finding activity (Dominowski, 1980).

The aim of primary research is to make known something previously unknown to human beings and to advance human knowledge by making it more certain or better fitting; the aim is discovery (Elias, 1986). Kerlinger (1970) uses more technical language to define it as: The systematic, controlled, empirical and critical investigation of hypothetical propositions about presumed relations among natural phenomena. The research philosophy depends on the way we think about the development of knowledge and this thinking affects the way we do search (Saunders 2000).

Whilst undertaking the research, a clear understanding of research philosophy is essential. Easterby-Smith et al (1997) identify three reasons why the exploration of philosophy may be significant with particular reference to research methodology: Firstly, it can help the researcher to refine and specify the research methods to be used in a study, that is, to clarify the overall research strategy to be used. This would include the type of evidence gathered and its origin, the way in which such evidence is interpreted, and how it helps to answer the research questions posed.

Secondly, knowledge of research philosophy will enable and assist the researcher to evaluate different methodologies and methods and avoid inappropriate use and unnecessary work by identifying the limitations of particular approaches at an early stage. Thirdly, it may help the researcher to be creative and innovative in either selection or adaptation of methods that were previously outside his or her experience. Two views about the research process dominate the literature: positivism and phenomenology which have an important part to play in business and management research (Saunders, 2000).

Positivism is founded on the belief that study of human behaviour should be conducted in the same way that as studies conducted in the natural sciences. On the other hand phenomenology is concerned with the understanding human behaviour from the participant’s own frame of reference (Hussey and Collis, 2003). Positivistic paradigm Phenomenological paradigm Tends to produce quantitative data Tends to produce qualitative data Uses large samples Uses small samples Concerned with hypothesis testing Concerned with generating theories Data is highly specific and precise Data is rich and subjective

The location is artificial The location is natural Reliability is high Reliability is low Validity is low Validity is high Generalises from sample to population Generalises from one setting to another Figure 1: Features of the two main paradigms (Hussey and Collis, 2003) As the research philosophy depends fundamentally on the research question (Saunders 2000), the phenomenological philosophy has been chosen in this paper. This choice originates from that researcher’s topic/question that aimed to investigate how sufficient is information provided in annual reports for shareholders in order to make their investing decision.

In this specific research, -related to the question- the author will collect data and develop a theory as a result of data analyses rather than developing a theory and test it afterwards. QUALITATIVE VERSUS QUANTITATIVE PRIMARY RESEARCH TECHNIQUES Qualitative techniques stand in contrast to quantitative techniques, the main difference being that quantitative techniques involve numerical data whereas qualitative techniques involve more abstract information. Data collected using qualitative techniques do not generally lend themselves to statistical analysis whereas quantitative techniques do (Veal, 1997).

A mixed methodological approach will be used in this research, because mixing methods enables the insufficiencies of both qualitative and quantitative methodologies research design to be overcome and can assist with data collection and data analysis (Jennings, 2001). An interview is a purposeful discussion between two or more people. It enables you to gather valid and reliable data that are relevant to tour research question and objectives. There are three types of interview; structured, semi-structured and unstructured interviews (Saunders et al, 2000). A semi-structured interview model will be utilized as it:

? Is flexible, not standardized ? Enables me to gain an analysis, explanation and description in relation to my research aim and objectives. ? Facilitates the exploratory nature of my research ? Gives me an opportunity to discover issues I have not considered before Interviews provide in-depth information about a particular research issue or question. They are designed to gather a broad range of information from a few units. They are the best method to get detailed answers about your questions. They are also the best method for advertising pre-testing, where researcher is seeking individual interpretations and responses.

The main disadvantage of interviews is that they are time consuming, and that the respondent may feel like ‘a bug under a microscope’ and be less willing to open up than in the relaxed atmosphere of a group (Research solutions 2005). A number of 10 people working in the managerial level in the accounting department of different companies in England. Choosing interviews for this stage of this part of the research was in order to get as much information as possible from the few people that will be interviewed. Interview questions will be compiled from the existing literature and detailed in relation to the research topic, aim and objectives

QUESTIONNAIRES In the questionnaires method of data collection the researcher can precisely obtain the information that he asks for and these information can be analysed in an easier way than if choosing another method. In addition to that questionnaires are not an expensive method of data collection, and they don’t take long time to fill in. On the other hand questionnaires have some disadvantages such as: they do not have a high response rate, the wording of the questions can cause bias to the client’s responses, and the questions might not be designed correctly, which will result in collecting unneeded answers (McNamara, 1999).

Choosing questionnaires for this step was due to the relatively large sample size that the researcher intends to include in his research, and for the cheap cost of this method comparing with other data collection methods. A sample of 200 shareholders will be involved in the questionnaire, because the larger the sample sized is the more adequate the results will be and the more generalizations can be drawn from the research.

ANALYSIS On their own, data are rarely used in their original form. Through the process of data analysis, value is added to the data to turn them into information.

It is information rather than data which users especially policy and decision makers are interested in (Uganda bureau of statistics, 2005). However this will be a very sensitive and critical stage in my research process as misinterpretation or over-interpretation is always a potential risk. The process of data analysis in this research will include the following steps: ? Indicate the date of the questionnaires. Who completed them, and the number of returns? ? Categorize the data collected. This can be done according to gender, origin, age… etc.

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