Factors affecting customers choice of banks to deposit

Based on the literature reviewed in the bank selection criteria, this study empirically investigates the main factors influencing customers’ choice of banks to deposit in Vietnam.. Logis

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business

I would not have been able to complete my thesis without the advice, assistance, understanding and encouragement of my supervisors, my family and my friends I would like to gratefully and sincerely acknowledge their assistance and support

First of all, the most important person I would like to thank is my supervisor, Dr Dinh Thai Hoang Thanks to his valuable advice and generous guidance throughout the process

of completing this thesis

Secondly, I would like to express my gratefulness to Dr Nguyen Dinh Tho and Dr Nguyen Thi Mai Trang for their kindness in supporting me to deal with issues in Research Design problem

Also, I would like to send my kindest gratefulness to my family, my mom, my dad and

my sister in supporting me, encouraging me throughout the hard time of completing my thesis

Furthermore, I would like to thank all of the staff at International School of Business – University of Economics Ho Chi Minh City who are always enthusiastic and give me a lot of administrative support, assistance and understanding

Finally, I would like to give my gratefulness to all my classmates who have been sharing with me all their knowledge and experience as well as joys and hardship during MBA course I would not complete my thesis without their support

In brief, it has been a long journey and I have grown in so many ways I would like to say

“thank you” again for the involvement of everyone who has helped me to complete this thesis

The priority task of not only bankers but also the economists in Vietnam is to attract more surplus capital into the bank channel to provide for the whole economy Accomplishing this task can help pushing enterprises into investing more, and expending business more, which attributes into boosting the whole national economy, especially in the context when interest rate of deposit is less attractive Based on the literature reviewed in the bank selection criteria, this study empirically investigates the main factors influencing customers’ choice of banks to deposit in Vietnam

A quantitative method via questionnaire survey was used to obtain the views of approximately 250 customers who are having or used to have deposit in banks in Ho Chi Minh City regarding their decision whether to choose this bank to deposit or not Logistic Regression analysis was used to test the proposed hypothese to investigate the relationship between customer’s choice and the influencing factors derived

According to the findings of this research, Comfortable and Financial benefits make a positive impact on Customers’ choice of banks to deposit The results of this research are important for bankers in managerial implications to enhance and improve their competitiveness, in other words, to allure and retain more deposit, which will ultimately result in more profitability to Banks and boosting more capital to the Economy

Keywords: Deposit, Customers’ choice, Bank selection criteria

Table of Content

CHAPTER 1 INTRODUCTION 1

1.1 Research Background 1

1.2 Research Problem and Research Objective 2

1.2.1 Research problem 2

1.2.2 Research objective 3

1.3 Scope of Research 3

1.4 Significance of Research 3

1.5 Research Structure 3

CHAPTER 2 LITERATURE REVIEW 5

2.1 Review on Customer choice of banks 5

2.2 Hypothesis development 7

2.2.1 Security 7

2.2.2 Financial benefits 7

2.2.3 Service quality 8

2.2.4 Convenience 9

2.2.5 Bank image 10

2.2.6 Demography 11

2.3 Research Model 12

CHAPTER 3 RESEARCH METHODOLOGY 13

3.1 Data Sources 13

3.2 Research process 13

3.3 Sample Size 16

3.4 Measurement Scale 17

3.5 Data Analysis Method 19

3.5.1 Reliability measure 20

3.5.2 Validity measure by EFA (Exploratory Factor Analysis) 20

3.5.3 Logistic regression analysis 21

CHAPTER 4 DATA ANALYSIS AND RESULTS 23

4.1 Descriptive stastistics survey results 23

4.1.2 Preparation data 23

4.1.3 Characteristics of the sample population 26

4.2 Reliability of measurement instruments 27

4.3 Validity of measurement instruments 30

4.3.1 Suitability of data 32

4.3.2 Factor extraction 32

4.3.3 Factor rotation 33

4.4 Logistic Regression analysis 39

4.4.1 Introduction 39

4.4.2 Computing variables 40

4.4.3 Assumption for Logistic Regression 40

4.4.4 Testing hypotheses 40

4.4.5 Controlling variables 44

4.5 Conclusion 45

CHAPTER 5 CONCLUSIONS AND IMPLICATIONS 47

5.1 Research Overview 47

5.2 Research Findings 47

5.3 Managerial Implications 49

5.4 Research Limitations and Directions for Future Research 49

APPENDIX 1 OPEN QUESTIONS FOR DRAFT SURVEY 59

APPENDIX 2 QUESTIONNAIRE 60

APPENDIX 3 EFA RESULT OF VARIABLES……….65

List of Figures

Figure 2.1 Conceptual framework……… 12 Figure 3.1 Research process……….…… …15 Figure 4.1 Re-constructed Conceptual framework……… 39

List of Tables

Table 3.1 Main factors affecting customers’ choice of banks to deposit………17

Table 4.1 Coded factors……… 24

Table 4.2 Sample summary……….……… ….26

Table 4.3 Cronbach’s Alpha test results……….…….28

Table 4.4 KMO and Bartlett’s test……… ……….…32

Table 4.5 EFA Rotated Factor Matrix……….33

Table 4.6 Re-run EFA KMO and Bartlett’s Test……….………35

Table 4.7 Re-run EFA Rotated Factor Matrix……… …… ………35

Table 4.8 Re-run Cronbach’s Alpha test result……… ………37

Table 4.9 Classification……… …… 41

Table 4.10 Variables not in the Equation……….…… 41

Table 4.11 Omnibus Test of Model Coefficients……… …….41

Table 4.12 Model Summary……… 42

Table 4.13 Variables in the Equation……….……43

Table 4.14 Control Variables in the Equation……… … 44

CHAPTER 1 INTRODUCTION

1.1 Research Background

In the modern time, the important role of bank deposits in economy is undeniable since without bank deposits businesses would not be able to access funds from individual (Ritter, Silber & Udell; 2008) Banks are a channel to collect savings from surplus sectors

in the form of deposits and bump this money into the economy in the form of loans If the people do not interact and deal with banks, a great portion of the economic capital would remain idle (Rosly, 2005) In the present context of Vietnam, while gold, stock market, or real estate investments are not likely suited for amateur investors (Vietnam News, 2014), bank deposit is still popular and favourable, regardless of the considerably low interest rates by the end of February, which was supposed to discourage deposits (The State Bank

of Viet Nam, 2014) On February 2014, according to the municipal Statistic Office (2014), in Ho Chi Minh City, total capital mobilization reached VND1.16 trillion (US$55.18 million), constituting a 15.1 per cent year-on-year increase Of that,commercial banks accounted for 56.8 per cent of the total city's deposits, up 18.4 per cent year on year (Ho Chi Minh City Statistic Office, 2014) Consequently, raising capital via deposits in commercial banks plays an important role not only in spurring economic growth and salvaging dying businesses in the present regression time of the economy but also creating profit for commercial banks themselves and depositors by interest rates (Ritter, Silber & Udell; 2008) In line with that, alluring customers to deposit is the requisite to any commercial banks, which needs to research for both theoretical and managerial purposes

The study of bank selection criteria has received attention from many bank marketing researchers since few decades ago (Abduh, 2012) However, most of the studies researched on bank selection criteria for a whole financial service aspect including deposits, credits, online banking… Plenty of these studies applied T-test, Probit or Multiple Linear Regression model to explore the factors affecting the customers’ choice

of banks to deposit Moreover, in Vietnam, a few recent studies on customers’ decision to

deposit in banks have only limited in one specific branch of bank In 2012, Hue conducted a research on factors affecting retail customers’ intention of depositing in BIDV Hue Branch In 2013, Ha, in her study in Vietnam obtained information about the factors determining the decision of retail customers in depositing in An Binh Bank Hue Branch This study tries to explore more specifically the factors affecting bank selection criteria to deposit in banks in a region of Vietnam applying Logistic Regression

From the above reasons, the study sees the essentiality in doing the research on “Factors affecting customers’ choice of banks to deposit” This study has attempted to

discover the important factors that influence retail consumers’ behavioral decision to choose banks to deposit by investigating customers depositing in banks in a region of Vietnam

1.2 Research Problem and Research Objective

their business especially in the current context By solving that problem, banks could allure more deposits, providing more opportunities for enterprises to approach capital, helping the economy in struggling for regression

1.2.2 Research objective

The objective of the present study is to identify and measure the main factors influencing customers’ choice of banks to deposit Consequently, the research questions of the thesis are raised as two following questions:

- What are factors affecting customers’ choice of banks to deposit?

- How these factors affect customers’ choice of banks to deposit?

1.3 Scope of Research

For limited conditions, the research is conducted in Ho Chi Minh City with the respondents who have deposits in banks with various careers The timeframe of research intentionally lasts from the middle of June to the end of August in 2014

1.4 Significance of Research

Depositing is the main channel to raise capital for the economy in Vietnam Besides, our economy is in the phase of regression due to the lacking of capital Findings of main factors influencing customers’ choice of banks to deposit in order to improve capital raising activities have the practical and essential value in the contemporary context

1.5 Research Structure

The research is divided into five chapters The first chapter introduces about background, research problems, research objectives, research questions, scope of research and research structures The second chapter covers literature review of the previous research and shows hypotheses, as well as the conceptual framework of the research The third chapter presents the research process, sampling size, measurement scale, main survey, and data analysis method The fourth chapter concentrates on preparation data,

descriptive data, assessment measurement scale and hypotheses testing Finally, the fifth chapter points out research overview, research findings, managerial implications, research limitations and directions for future research

CHAPTER 2 LITERATURE REVIEW

Overview

This chapter discusses about the theoretical framework related to the customers’ behaviour Then, the chapter presents a review of the literature in the bank selection criteria which concentrates on factors influencing customers’ choice of banks to deposit from developed financial markets to developing ones, including Vietnam From the literature reviewed, five hypotheses (H1, H2, H3, H4) are proposed with five factors derived including security, financial benefits, service quality, convenience and bank image The controlling variables such as gender, income and experience of depositing are also tested their effect on customers’ choice of bank to deposit

2.1 Review on Customer choice of banks

Financial industries, especially banks, are becoming more and more competitive day by day since the gaps between financial institutes are narrower Besides the traditional competitive advantages such as interest rate, product attributes, etc., banks are also competing in service differentiation, easiness of service availability, technology used in service delivery, bank facilities (Goiteom, 2011) Thus, to attract customers, banks are facing challenges more than ever Consequently, it is crucial for bankers to know what selection criteria customers are adopting in choosing banks to deposit

The study of bank selection criteria and bank patronize behavior has been done in a large number of studies In some developed countries, Kennington et al., (1996), Almossawi (2001) and Şafakli(2007), for instance, found that the bank’s reputation was the main factor in determining customers’ decision in using banks’ services, while in some other developing countries, Owusu-Frimpong(1999), Ta and Har (2000), Kaynak and Harcar (2005) and Safakli (2007) found that profitability factors and service quality, such as low service charges and high interest rates, were the major reasons why customers chose a particular bank

The other factors which are also reported to be significant affecting customers’ decision are convenience, competence, recommendation by peers, and free banking charges

(Hinson et al., 2009; Blankson et al., 2007; Laroche et al., 1993; Ardic & Yuzereroglu, 2009; Yavas & Kaynak, 1993; Babakus et al., 2004) Saunders et al., (2007), for an extension, investigated the banking behavior of poor people in South Africa and reported that a bank which could offer more beneficial products for the people would have bigger opportunity to be chosen

A study was conducted by Abduh et al (2012) on the Indonesian customer's attitude in bank selection criteria and bank patronizing behavior They targeted the customers of Islamic banks The findings of his study were that most customers prefer state-owned banks and that interest rate was their first consideration in patronizing a particular bank The customers also put reason of safety of fund during the financial crisis as priority to patronize Islamic banks in Indonesia In addition, bank’s marketing and advertisement also highly influences individuals to patronize Islamic banks

A recent study conducted by Khaled et al (2013) investigated the factors influencing Yemeni's consumers who possibly differ from consumers in the developed countries in terms of their psychological, cultural and behavior to use the banking system involving depositing They found that service quality, banking Legal framework, and bank advertisement had significantly positive effects on behavioral intention to use banking services in Yemen except cultural belief where it was significant but played a negative role in using the banking services in Yemen

In Vietnam, Hue (2012) conducted a research on factors affecting retail customers’ intention of depositing in BIDV Hue Branch The study indicated that there were five major factors that influenced retail customers’ intention of depositing in BIDV Hue Branch which were high interest, recommendation from relatives, brand awareness and population, quality of service and promotion

Most recently, Ha (2013), in her study in Vietnam obtained information about the factors determining the decision of retail customers in depositing in An Binh Bank Hue Branch She found that promotion, employees’ skills, recommendation from relatives, location,

and convenience were key determinants in the decision of retail customers in depositing

in An Binh Bank Hue Branch

In developing countries, customers have a tendency of depositing in banks where their funds are protected and guaranteed since the banking system is still developing and needs

to become sophisticated to survive if any crisis occurs The cyclical financial crises have frightened bank customers about losing their money if their bank liquidated or announced

to be bankrupt The rational action to mitigate the financial crisis risk is by depositing their money in a safer place, which are Islamic banks (Abduh, 2012) Consequently, in Malaysia, in a study of Abduh (2012), bank’s reputation was placed in the third rank of attributes affecting customers’ choice of banks

The paper, therefore, hypothesizes that:

H1: There is a positive relationship between banks’ security and customers’ choice

of banks to deposit

2.2.2 Financial benefits

Financial benefits consist of high interest on saving (Goiteom, 2011), new account premiums or gifts (Aderson, 1976) According to Anderson (1976), financial considerations constituted the principle determinants of bank choosing decision Erol and El-Bdour (1989), Metawa and Almossawi (1998), and Dusuki and Abdullah (2007) also come up with profitability as among the factors affecting customer decision to join a bank

Similarly, in a study of Abduh (2012) operated in Malaysia, financial benefits come as the second highest rank of attributes affecting customers’ choice of banks In Jordan, which is also a developing country, Erol & El-Bdour (1989) concluded that instead of religiosity, another factor like rate of return constituted the main factors influencing individual customer to patronize particular bank

In USA, Javalgi et al (1989) found out that high interest rate on savings was among the most important factors affecting the determinants of customers’ bank selection decision Similarly are the results of Boyd et al (1994) research run in USA, and Ta and Har (2000) research run in Singapore

The paper, therefore, hypothesizes that:

H2: There is a positive relationship between financial benefits and customers ’ choice

of banks to deposit

2.2.3 Service quality

Most economies are becoming more service-driven In the bank sector, where competition becomes harsher and harsher, maintaining the quality of service is a pre – requisite for survival (Sharma & Mehta, 2005) Customer handling approach of bank personnel is also reflects the quality of service, which is not restricted to a smile or passing greeting to customers but also the customer relations and techniques of answering telephones (Jantan, 1998) Efficiency of service also includes the speed of transaction, shorter waiting time (Muhamad et al., 1998) Other studies revealed that fast and efficient

service, speed of transaction and staff friendliness were frequently stated as the most important attributes in purchase decision process (Sudin & Norafifah 1992; Kaynak, Kucukemifoglu & Odabasi 1991; Erol & El-Bdour 1989; Tumbull 1989)

Another prerequisite issue is that professionalism and politeness of staff are of the essence of making service faster and more efficient (Stafford, 1994) According to Jantan (1998), bank employers’ inefficiency and low quality of service decreased the bank credibility causing the customers’ dissatisfaction, which might have affected the customers’ choice of banks Solving problems concerning technical skills accuracy and timely service plays an important part in pleasing new customers and retaining loyal customers

In Malaysia, Haron et al., (1994) study the selection criteria of Muslim and non-Muslim customers in patronizing a particular bank As the result, Haron et al., (1994) discovered that one of the most important factors considered by both Muslim and non-Muslim when selecting their financial institutions is “fast and efficient service” and “friendliness of bank personnel”

The paper, therefore, hypothesizes that:

H3: There is a positive relationship between banks’ service quality and customers’ choice of banks to deposit

2.2.4 Convenience

In the modern time, where everything needs to be executed at its top speed, convenience

is a commodity readily marketed and handily profitable (LoBello, 1985) According to Anderson (1976), convenience consists of full service offering, hours of operation, which brings the customers the ultimate comfortability in managing their deposits To the extent

of conscious deliberation, convenience appears to be a dominant determinant in customers’ bank selection decision (Anderson, 1976)

Additionally, by providing extra facilities, like extended hours of service will allow the customer more flexibility in transactions with banks instead of rushing to banks during standard banking hours which may not convenient for them (Jantan, 1998)

In Indonesia, during year 2000 until 2005, Bank Indonesia (BI) together with Department

of Statistics of Bogor Agricultural University (IPB) conducted a wide survey for West, Central, and East Java respectively as well as West Sumatera and South Kalimantan The research concluded that convenience was one of the main factors in patronizing banks

In a research of Khaled (2013) in Yemen, the analytical results also revealed that convenience was considered as a first choice of bank selection Besides, in USA, a Wall Street Journal/ NBC survey conducted in 1975 found that 75% of household earning USD 100,000 or more felt that “managing their time is a bigger problem than managing their money” (Mesister, 1996) Therefore, convenience is an important attributes to the purchase decision of customers

The paper, therefore, hypothesizes that:

H4: There is a positive relationship between convenience and customers ’ choice of banks to deposit

2.2.5 Bank image

Bank image includes bank’s facilities, transaction space, internal or external decoration…

A bank with well-equipped facilities, attractive and professional internal or external decoration would increase the customers’ belief in depositing

In Malaysia, a research of Muhamad et al in 1998 measured the relative importance of five attributes: efficiency, physical facilities, range of service, terms of payment and media and social influence on each dimension of foreign and local banks using Analytic Hierarchy Process (AHP) method The finding was that Customers’ preference for local bank is influenced by physical facilities, range of service, terms of payment and media

In developed countries, Erol and El-Bdour (1989), Erol et al (1990), Kennington et al (1996), Almossawi (2001), Şafakli (2007) and Dusuki and Abdullah (2007) found that the dimension of bank’s quality of services/facilities, reputation, profitability and staff friendliness were the fundamental factors in depositors’ bank selection criteria

Another investigation on the Islamic-bank selection criteria, particularly in Malaysia was conducted by Abduh M and Omar M in 2012 To accomplish this purpose, information collected from 279 respondents within the Klang-valley area was incorporated in the analysis The Analytic Hierarchy Process was used to rank the criteria based on the respondents’ preferences The result has shown profitability, bank’s reputation, bank’s status, facilities and services, and friendly personnel respectively (Abduh & Omar, 2012)

The paper, therefore, hypothesizes that:

H5: There is a positive relationship between bank image and customers ’ choice of banks to deposit

H5

Demographic attributes (gender, income, and experience of depositing

CHAPTER 3 RESEARCH METHODOLOGY

Overview

This chapter presents the research methods and approaches used to investigate customer bank selection criteria in Ho Chi Minh City including research approach, measurement, sampling, data collection, and data analysis technique

Doing this research, several ideas from specialists in bank deposit have provided a wide range of good reference for the author to create a good research on customers’ choice of banks to deposit as well as a solution to improve these determinants and increase deposits for the bank in this case

3.2 Research process

Step 1: Review the literature background to find out factors that influence in customers’ choice of banks to deposit The findings in this step were used to be the foundation for later quantitative research to confirm the intensity of the explored results

Step 2: Theory Model was built based on the literature review above The dependable variable was identified as “Customers’ choice” The five independable variables were defined as “Reputation”, “Financial benefits”, “Employers’ efficiency”, “Variety of services” and “Convenience” with Demographic attributes as Control variables

Step 3: Focus group interview was chosen as an in-depth interview In this research, the author has chosen group of 10 customers who were depositing or used to deposit in banks and ask some open-ended questions based on the previous research, for example:

- What are the key factors for you to choose to deposit in a bank?

- What makes you think that these factors are important?

- What are determinants affecting this key factor in your choice of banks to deposit?

- Why you choose theses factors but not the others?

A draft questionnaire with the measurement scales was then set up

Step 4: Next, the draft questionnaire was delivered to 02 management officers who involving in depositing department and 03 specialists in depositing in banks to respond, and a discussion about the draft questionnaire was carried out later The aim of the pilot phase was to modify and clear the measure scale

After that, the revised questionnaires were delivered to another small group of 5 persons

to test about clear understanding of the questionnaire Finally, a main survey was built up with some adjustment

Step 5: The main survey was adjusted based on feedbacks received from the customers and specialists The dependable variable was still “Customers’ choice” The five independable variables were re-defined as “Security”, “Financial benefits”, “Service

quality” “Convenience” and “Bank image” The main survey was conducted with 254 respondents

Step 6: The sample size consisted 254 observations Questionnaire was sent directly to the customers who visited banks for transactions The rest amount of questionnaire was sent via email to the author’s friends, colleagues or relatives who live in Ho Chi Minh City By using filter question, the respondents were defined as people who were depositing or used to deposit in Banks

Step 7: After finishing the survey, the data was collected and prepared to analysis Data was edited, coded and adjusted for missing data Next, reliability of measuring instrument was analyzed by calculation Cronbach’s alpha which was required above 0.7 (Hair et al., 2010)

Step 8: The validity of measuring instrument was also evaluated to define the number extracted factors based on the Eigenvalue value over than 1 and changing of the slope in the Scree plot (Hair et al., 1998; Tabachnick & Fidell, 2001)

Step 9: The coded and adjusted data, then, was analyzed through five hypothesizes to find out whether five dimensions above have positive relationship with customers’ choice of banks to deposit The Logistic regression analysis was applied to evaluate the relationship between five independent variables, including “Security”, “Convenience”,

“Service quality”, “Financial benefits”, “Bank image” and one dependent variable, namely “Customer’s choice” Moreover, defining whether there was any significant contributory of control variables consisting of “gender”, “income”, and “experience

of depositing” on customers’ choice of banks to deposit was also analyzed by the Logistic regression

Step 10: Based on the findings from previous step, conclusion was drawn and managerial implication was suggested

The research process is illustrated by the following Figure 3.1

Literature Review

Develop Theory Model

In-depth Interview Design First Draft Questionnaire

Figure 3.1: Research process

3.3 Sample Size

A data set satisfied requirement of Exploratory Factor Analysis was five times the number of variables and at least more than 100 (Hair et al., 1998) n = 5k (k: number of variables) and n > 100 Therefore, in this study, the minimum sample required by EFA was n = 5 x 23= 115

Besides, based on the work of Peduzzi et al (1996), a minimum sample size for logistic regression must ensure the formula of N = 10 k / p where p is the smallest of the proportions of negative or positive cases in the population and k the number of covariates (the number of independent variables) As there were five independent variables including in the model and the proportion of negative cases in the population is 0.39 (39%) The minimum number of cases required is N = 10 x 5 / 0.39 = 128 If the resulting number is less than 100 you should increase it to 100 as suggested by Long S J (1997)

Conclusion and Managerial

As a result, the minimum sample size in this study was 128 which would be satisfied both EFA and logistic regression analysis In this paper, the author collected a sample of 254 observations

3.4 Measurement Scale

In order to operate concepts, it is necessary to measure them in some manners, so different variables are required to choose an appropriate scale The independent variables were applied interval scale with five - point of Likert scale consisting of totally disagree (1), disagree (2), neutral (3), agree (4), totally agree (5); beside, the dependent variable was dichotomous variable with two option Yes or No The control variables were measured with two states for the simplicity on testing Gender were observed as Male or Female; Income as Less than 10 millions and Above 10 millions; Experience of depositing as Less than 3 years and Above 3 years

A summary table of main factors affecting customers’ choice of banks to deposit is

presented as following Table 3.1

Table 3.1: Main factors affecting customers’ choice of banks to deposit

Banks which relatives recommend stimulates confidence

Secu4

Interest payment schedule is flexible Fin2

Transparent interest rate is quoted Fin3

High interest rate with short schedule is offered

al, (1986), Jabagi (1989), Denton & Chan (1991)

Professional documents provide good impression

Kucukemifoglu & Odabasi (1991), Erol & El-Bdour

Efficency of employees provide good impression

Convenient operating hours stimulate customers’ transaction

al (2000);

Dawson et al (1990); Zhang et

al (2007)

Income affects the customers’ decision Inc1 Experience of depositing affects the customers’ decision

al (2009); Abduh

& Omar (2010)

3.5 Data Analysis Method

After data collection, the first step was data preparation with editing, coding, and data entry to ensure accuracy of data from raw data and to detect errors or omissions to

correct Next, data was classified to arrange them into groups or classes of common demographic

Finally, variables were tested reliability by Cronbach’s alpha, validity by EFA, and

hypothesis and model was tested by Logistic regression of SPSS

3.5.1 Reliability measure

In order to check reliability of each of scales with particular sample, as well as consider the internal consistency of the scales, it is necessary to use Cronbach’s Alpha coefficient which should be above 0.7 (Devellis, 2003)

Also, the corrected item - total correlation values should be at least 0.3 to ensure each of

items was measuring the same from the scale as a whole (Pallant, 2011)

3.5.2 Validity measure by EFA (Exploratory Factor Analysis)

In order to evaluate the validity and the correlation among variables to identify underlying factors or to define number of extracted factors, EFA is applied with the oblique approach using the Promax method However, some requirements of EFA should

be satisfied (Pallant, 2011):

- The minimum of sample size should be at least 100 and rate of observations per items

of models should be five cases for each of the items

- The correlations of r of the correlation matrix should show at least 0.3

- Kaiser-Meyor-Olkin (KMO) test must be equal or above 0.6 (Tabachnick & Fidell, 2007)

- Barllett’s test of sphericity should have significant less than 5%

- In order to extract factors, the eigenvalue of factors must be greater than 1 (Kaiser,

1956)

3.5.3 Logistic regression analysis

To explore the relationship between independent variables, consisting of “Security”,

“Bank image”, “Service quality”, “Convenience”, “Financial benefits” and a dichotomous dependent variable, namely “Customer’s choice” as well as to evaluate the importance of those independent variables in the framework model, the Logistic regression analysis was conducted

The Logistic regression analysis required that following conditions should be satisfied:

- The minimum sample size required

- The multicollinearity does not exist, so r value, the correlated score is less than 0.9

- The collinearity test on variables is through two values “tolerance” and “VIF”, particularly the VIF should not be less than 0.1, or above 10

The Logistic regression is used to test hypotheses, to explore the relationship between five independent variables and one dependent variable, and to consider whether control variables supported or not to dependent variable The generalized equation (Donald & Pamela, 2006) was:

Logit[p(x)] = log {p(x)/[1-p(x)]} = a + b1x1 + b2x2 + b3x3…

Where:

p = the probability that a case is in a particular category;

a = the constant of the equation and,

b = the coefficient of the predictor variables

Conclusion

This chapter introduces the research methods and general information about the way the research was conducted including research approach, measurement, sampling, data

collection, and data analysis technique More detail discussion of the analytic methods used and results are provided in the Chapter 4

CHAPTER 4 DATA ANALYSIS AND RESULTS

Overview

This chapter presents data preparation with editing, coding, and data entry from raw data

to correct errors For this paper, data were described through frequency tables about the general information After using Cronbach’s alpha to test the reliability of variables and EFA to test their validity, the Logistic regression was run to explore the relationship between independent variables and dependent variable, and to test hypotheses

4.1 Descriptive stastistics survey results

The quantitative research was conducted in Ho Chi Minh City by using questionnaire dividing into 2 parts: the first part is customer’s general information and the second part

is customer’s judgment on banks depositing or used to deposit The first part was used as control variables while the second part contained data to analyse dependable and independable variables The survey were designed after consulting managerial officers in bank depositing field and experienced bank deposting customers The official survey were delivered to depositing customers both in person and through email 368 suverys were sent and 311 feedbacks were received with ratio of 84,5%

Coding: With customer’s general information, each answer was assigned numbers of symbols so that the responses were grouped into a limited number of categories With customer’s judgment on banks, statements were evaluated by 5 point-Likert scale ranging from number 1 to number 5 (see Table 4.1)

Table 4.1 Coded factors

No Factors Code Description Variable

name

Coding/ Creating dummy

confidentiality

Secu4

5 Financial benefits Interest rate on savings Fin1 Record numbers

13 Procedure Con4

15 Service quality Hospitality Ser1 Record numbers

20 Bank image Modern facilities Ima1 Record numbers

variable 1= “Less than 40” 0= “Over 40”

27 Experience of depositing Experience Creating dummy

variable 1= “Less than 10 million dongs” 0= “Over 10 million dongs”

4.1.3 Characteristics of the sample population

The paper chose the customers who were used to experience any kinds of deposits in any banks in Ho Chi Minh City with age from 18 to over 50 They were encouraged to judge one of their old or recent banks and gave the decision whether they continue or quit the service Besides, five questions were used for collecting personal information of the respondents including Gender, Age, Education, Income, Experience of depositing 254 samples were used for official analysis and briefly discussed as following table

Table 4.2 Sample summary

4.2 Reliability of measurement instruments

Cronbach’s alpha was computed and used to inspect the reliability of the items researched Each scale with particular sample which is considered to be reliable and internal consistent, should have the Cronbach’s Alpha coefficient of above 7 (Devellis, 2003)

Also, to ensure each of the items is measuring the same from the scales as a whole, the corrected item-total correlation values should be at least 3 (Pallant, 2011)

Each concept was run Cronbach’s Alpha to test its reliability Items with Cronbach’s alpha coefficient less than 7 and corrected item-total correlation lower than 3 were deleted The Cronbach’s Alpha analysis was summarized as Table 4.3 below:

Table 4.3 Cronbach’s Alpha test results

Variables Scale

Mean if Item

Deleted

Scale Variance if Item

Deleted

Corrected Item-Total Correlation

Squared Multiple Correlation

Cronbach’s Alpha if Item

Deleted SECURITY Alpha= 838

Security was measured by 4 items with overall alpha coefficient of 838 Cronbach alpha

if item deleted of all items were less than alpha coefficient of factors (.838), which means that deletion of any item from questionnaire would not improve the factor’s reliability Besides, Corrected Item-Total correlation of all items was much more than 0.3 Therefore, all items for Security were reliable for next analysis

Cronbach’s alpha coefficient of Financial benefits of 888, presented an good reliability

as mentioned above Moreover, the alpha coefficient of each item was lower than 888, showing that no item should be deleted from the Financial benefits variable Corrected Item-Total Correction column of this factor consisted of high number over 3 Hence,

Financial benefits variable and five of its measuring scales were accepted and used for further analysis

The alpha coefficient of Convenience was 877 Furthermore, Cronbach’s alpha if Item Deleted showed that no improvement in the overall reliability of the scale occurred when any of these questions were deleted and the Corrected Item-Total Correlation of all items above 0.3 Thus, all of items represented for this factor and the factor was included in subsequent analyses

The general alpha coefficient of Service quality was 871, which was higher than the required standard (.70), which indicated for its reliability Cronbach’s alpha if Item Deleted of all items were lower that the overall alpha coefficient, reflecting their good contribution to factors Moreover, Corrected Item-Total Correlation of all items were much more than 3 Consequently, this factor was reliable and all its measuring scales would be used for the next EFA test

Alpha coefficient of Bank Image also achieved a high value by 872 Most of items had good contribution to the general alpha with all Cronbach’s alpha if item deleted was lower than 872 Corrected Item-Total Correlation of all items were also higher than 03 Therefore, 5 items of customer loyalty were accepted and used for further analyses

4.3 Validity of measurement instruments

Construct validity was examined by analyzing both convergent and discriminant validity Convergent validity examines whether or not the measures of the same construct are correlated highly, and discriminant validity determines if the measures of a construct have not correlated too highly with other constructs (Sekaran, 2000) A number of methods were suggested for assessing convergent and discriminant validity: factor analysis, correlation, and other more advanced procedures In this study, convergent and discriminant validity were assessed by performing EFA In order to be considered as convergent validity, the final items (not including deleted items) should be loaded highly

on one factor (Anderson and Gerbing, 1988), with a factor loading of 0.50 or greater

(Hair et al., 1995) As for discriminant validity, the estimated correlations between the factors should be checked (Kline, 2005) That is, items should correlate higher among one construct than they correlate with other items from other constructs

From the Cronbach’s alpha test, measuring scales of all factors were reliable and no item was deleted from the scales Next, factor analysis - EFA method - was used to test validity of items

Factor analysis is a collection of methods for explaining the correlations among variables

in terms of more fundamental entities called factors The goals of factors analysis are to determine the number of fundamental influences underlying a domain of variables, to quantify the extent to which each variable is associated with the factors, and to obtain information about their nature from observing which factors contribute to performance on which variables (Cudeck, 2000) In other words, with Factor analysis, a large number of variables are summarized and reduce into smaller number of factors

Principal axis factoring is a type of Factor analysis which seeks the least number of factors which can account for the common variance (correlation) of a set of variables In other words, each variable is affected by common factor variance (Ferketich & Muller, 1990) Principal axis factoring was used because all variance is not accounted for by each item in this research Varimax rotation is an orthogonal rotation of the factor axes to maximize the variance of the squared loadings of a factor (column) on all the variables (rows) in a factor matrix, which has the effect of differentiating the original variables by extracted factor Each factor will tend to have either large or small loadings of any particular variable A varimax solution raises results which make it as easy as possible to identify each variable with a single factor This is the most common rotation option as it maximizes the sum of the variables of the squared loadings in the factor matrix which leads to having greater number of items loading on the extracted factors (Russell, 2002) Therefore, we conducted exploratory factor analysis (EFA) with Varimax rotation to analyze the observed variables, and use KMO (Kaiser-Meyer-Olkin) and Bartlett’s test method to measure the compatibility of the survey and the result