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Journal of Economic & Administrative Sciences

Vol. 18, No. 2, December 2002

Factors Affecting Student Performance in the Introductory Finance Course Hussein A. Hassan Al-Tamimi University of Sharjah

Abdel Rahman Al-Shayeb UAE University

Abstract The objective of this paper is to investigate some factors affecting student performance in the fundamentals of financial management course (BUSA 2402) at United Arab Emirates University. We analyzed a sample of 256 students, consisting of 146 female and 110 male students. Using ordinary least square (OLS) multiple regression, factors, which significantly explained variation in the student performance, were identified. The significant variables that resulted from the model included cumulative GPA, attendance, gender, and semester load. The insignificant variables were students’ grades in economics, accounting and math courses. The results also reveal that significant gender differences exist, with males outperforming females, which is consistent with a large number of previous empirical studies. Introduction Student’s course performance is an important determinant of his/her future success. Student performance in UAE University is generally determined by the student’s cumulative grade point average (CGPA). The CGPA is a common measure used by most universities and is a crucial factor in admission to postgraduate programs, access to job markets, recruitment in universities as a teaching assistant, financial aid and other recognition. The objective of this paper is to investigate some factors (i.e. cumulative GPA, attendance, grades in math, economics and accounting, credit hours, gender, and semester load) affecting student performance in the fundamentals of financial management course at UAE University where it is a college (College of Business and Economics) required course. The motivation or the main reason for this investigation is the unsatisfactory experiences of non-completion, failure, or insufficiently high grades in this course as it will be shown below. The majority of the students required to take this course do not like it and, indeed dislike most of the courses in finance and banking. The dislike

Dr. Hussein Al-Tamimi & Dr. Abdel Rahman Al-Shayeb

arises from cultural and religious beliefs. This belief is based on the fact that in Islam interest is forbidden, therefore, people generally do not like to work with those institutions which deal with interest or even they do not like courses related to interest matters (i.e., finance courses). For example, when we ask students if they would like to specialize in finance and banking, most of them answer no. Such attitudes have adverse effects on student performance in the introductory finance course (i.e., the fundamentals of financial management). To establish this, we consider the unsatisfactory experiences of non-completion, failure or insufficiently high grades, as indicated in Table 1, which contains a sample of attrition rates in the introductory finance course. Students who fail, drop out, or do not obtain at least a C grade represent a considerable proportion (up to one third) of the total students enrolled in this course. Table 1 Fundamentals of Financial Management Attrition Rates Fall 1999 Spring 2000 Initial enrollment 157 118 Percentage dropping course 8.5 6.8 Percentage Fail 6.9 4.8 Percentage achieving grade 18.2 15.1 D & D+ 33.6 26.7 Sum Literature Review Factors affecting the performance of students in courses have been covered in many empirical studies in the field of business and economics. However, most of these studies were in the area of accounting and economics, with a few in the area of finance (Didia & Hasnat,1998). Some of these studies concentrated on identifying gender differences in performance in economics courses, such as Lage and Treglia (1996), Horvath, Beaudin, and Wright (1992) and Heath (1989). Most empirical studies concluded that males perform better than females, see for example Tay (1994) and Heath (1989), especially at college level, Gohmann and Specter (1989) and Watts and Lynch (1989). However, some studies found no gender difference, see for example Didia and Hasnat (1998), Rhine (1989) and Watts (1987). In the UAE, as in most Muslim countries, there is a conservative attitude toward gender. For that reason we will emphasize this aspect as we ٧٧

Journal of Economic & Administrative Sciences

December 2002

expect gender differences in performance, with females outperforming males. This expectation is mainly based on the fact that female students are governed by strict regulations which do not allow them to get out of the females campus during the week except visiting home during the weekends. Such regulations are assumed to enhance student’s productivity in order to obtain higher grades. Some studies were concerned with class attendance and student performance. Chan, Hum and Wright (1997), for example, have examined this relationship and found a significant positive relationship between attendance and student performance in the principles finance course. Other studies reached the same conclusion, such as Romer (1993), Park and Kerr (1990), Durden and Ellis (1995) and Stephenson (1994). Cumulative grade point average (CGPA) was also included in a large number of empirical studies as one of the determinants of student course performance, such as Didia and Hasnat (1998) in which they found a strong positive relationship between CGPA and the grade received in the fundamentals of financial management course. The same results were obtained, namely; strong relationship between cumulative GPA and student performance in accounting by Doran, Bouillon and Smith (1991)), Eskew and Faley (1988) and Buehlmann and Techavichit (1984). However, few studies found a negative relationship between cumulative GPA and student course performance, such as Turner, Holmes and Wiggins (1997) and Tay (1994). Didia and Hasnat (1998) included semester number of credit hours as one of the determinants of student course performance in the university introductory finance course, and they found positive signs and significance at the 0.05 level, while Chan, Sheim and Wright (1998) found an unexpected negative relationship. Other variables such as age were also included in the empirical studies. However, age is not so important in the case of UAE University because all students are in the same age group, and they are full time students admitted directly from secondary school. Another factor was also included in the empirical studies, namely, faculty members. Again, this is not so important in our case because there was only one instructor. Finally, some courses related to the fundamentals of financial management course were also included in empirical studies, namely, mathematics, economics and accounting, see for example, Didia & Hasnat (1998), Tay (1994) and Gramlich (1993). ٧٨

Dr. Hussein Al-Tamimi & Dr. Abdel Rahman Al-Shayeb

The Data This study was conducted at the College of Business and Economics, United Arab Emirates University. The College of Business and Economics consists of four departments: Accounting, Economics, Statistics, and Business Administration. The Department of Business Administration offers the fundamentals of financial management course (BUSA 2402) as a college requirement for all majors. The data in this study is drawn from six sections of BUSA 2402 offered in the fall and spring semesters of 1999/2000. The course is taught independently for females and males. The total enrollment in these sections was 275 students. Our sample consists of 146 female students and 110 male students (the difference between the total enrollment and the sample represents the numbers of students who dropped the course). The information for this study has been obtained from two sources. First, the information related to grades in fundamentals of financial management, math, economics, accounting, cumulative GPA, credit hours, gender, and semester load were obtained from official records. Second, the information related to students’ attendance was obtained from the instructor’s attendance checkbooks. At the UAE University, students earn grades ranging from A to F, with pluses for all grades except A and F. In this study we used the original grades before transferring them into the points system. Table 2 provides descriptive statistics for the dependent (student grade in the fundamentals of financial management course) and the independent variables mentioned above. Table 2 reveals that the average grades in the fundamentals of financial management, math, economics, accounting and CGPA are in the C and C+ categories .Table 2 also shows that the mean for attendance is 91.72%, for accumulated credit hours is 74.55 and for semester load is 15.66. We expect to find a positive correlation between the dependent variable and cumulative GPA, attendance, grades in math, accounting, economics courses and gender. A positive correlation between the dependent variable and credit hours is also expected, because we presume that the more credit hours studied the more the student will be able to contend with the difficulties and responsibilities of university course work. A negative correlation between the dependent variable and the semester load might be expected, since we presume that the heavier a student’s semester load, the lower the grade the student would achieve in the fundamentals of financial management course.

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Journal of Economic & Administrative Sciences

December 2002

Table 2 Means and Standard Deviations of Student Performance and Other Characteristics Means Standard Deviations Grades in FM course 73.68 11.26 (Student Performance) Attendance 91.72 7.38 GPA 73.35 5.7 Math 79.83 12.39 Economics 76.44 10.71 Accounting 73.07 12.03 Credit Hours 74.55 15.23 Gender* 0.43 0.50 Semester load 15.66 2.19 * Gender is a dummy variable with the mean representing the proportion of males.

The Empirical Model We used ordinary least squares to regress the introductory finance course final grade (student performance) on some factors affecting the student performance in this course. The objective of this procedure is to examine the amount of variance explained in the dependent variable by the independent variables and to assess their importance and incorporation into the regression equation (Hussein, Tan and Adams, 1994). The following independent variables were included in the model: cumulative GPA, attendance, grades in math, economics and accounting, credit hours, gender, and semester load. The model has the following form: GRADE where GRADE

CGPA ATTEND MATH

= f ( CGPA, ATTEND, MATH, ECON, ACCT, CRDH, SEMLOAD, GEN), = Student original grade in the fundamentals of financial management course before being transformed into the point system. = Cumulative grade point average. = Attendance. = Student original grade in the Mathematics course before being transformed into the point system. ٨٠

Dr. Hussein Al-Tamimi & Dr. Abdel Rahman Al-Shayeb

= Student original grade in the Economics (Micro and Macro) courses before being transformed into the point system. = Student original grade in the Accounting course before ACCT being transformed into the point system. = Total credit hours. CRDH SEMLOAD = Semester load. = Gender. GEN ECON

Using more than one independent variable to examine their contribution to the regression model may suggest a multicollinearity problem among these variables. Table 3 provides the correlations among the variables. Using the “rule of thumb” test, suggested by Anderson et. al (1990), that any correlation coefficient exceeding 0.7 indicates a potential problem, it is seen in Table 3 that the correlations among the independent variables are not high enough to indicate that a serious multicollinearity problem may exist. Table 3 Cross-Correlations Among Independent Variables SEMLOAD

GEN

1.000 -.001 -.109 .191

CRDH

1.000 .591 1.000 .223 .423 1.000 .435 .679 .308 1.000 .419 .678 .260 .541 -.084 -.026 -.050 -.004 .187 .002 -.088 -.083 .298 .292 .116 .141

ACCT

ECON.

MATH

CGPA

1.000 .269 .150 .069 .171 .127 .079 -.211 SEMLOAD .012

GRADE

ATTEND

ATTEND GRADE CGPA MATH ECON ACCT CRDH GEN

1.000 -.301 1.000 .149 .129 1.000

The Results We ran an ordinary-least square (OLS) regression routine including all independent variables. This yielded a highly significant model (p