Glasgow Theses Service
Feng, Ying (Olivia) (2014) The development of an instrument to measure
individual dispositions towards rules and principles; with implications for
financial regulation. PhD thesis. Copyright and moral rights for this thesis are retained by the author

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1


Acknowledgements
I would like to first of all express my deep gratitude towards my loving parents, Mrs
Ding De Zhen and Mr Feng Shu Lin who supported me through what has
undoubtedly been the most challenging task I have undertaken in my life so far. I
know I always have my parents to count on when times are tough.

I would also like to thank my friends in Glasgow for being understanding and offering
help whenever I needed it in all sorts of forms. In particular, I would like to thank my
dear friends Alvise Favotto and Stan Kerr (who has sadly passed away in September
2013 unexpectedly) for supporting me academically and emotionally throughout my
research journey, showing patience to my sometimes unreasonable demands. I would
like to thank Eirini Bazaki for being a wonderful friend and flatmate. I also wish to
thank Alan. S. Johnston for proofreading my thesis.

I would like to thank my two supervisors, Professor John Francis McKernan and
Professor Patrick J. O’Donnell for their continuous support. I feel eternally grateful to
you both. Without your encouragement and guidance; the completion of this PhD
would not have been possible.

I would like to thank all the people who have participated in my research. I would like
to express my gratitude to Glasgow University, Accounting and Finance department,
for funding my PhD. I also would like to express my gratitude to the Institute of
Chartered Accountants of Scotland for providing support in the form of Seed-corn
funding for some of the data collection involved in this PhD.

Finally, I would like to thank myself and God, for believing in myself and being
persistent in the face of many obstacles and challenges. The PhD journey has taught
me much more than just academic research, it has made me a better human being.
Table of Contents 4
List of Tables 14
List of Figures 18
Author’s Declaration 20
Abbreviations 21
Chapter 1: Introduction to the PhD 22
1.1 Introduction 22
1.1.1 The objective of the present PhD 22
1.1.1.1 My prior research journey 22
1.2 The organisation of the chapter 23
1.3 Rules vs. principles after the Global Financial Crisis 24
1.3.1 Research Background 25
1.3.2 Research Gap 26
1.4 Research Motivation 28
1.5 Research Questions 30
1.6 Research design and methods 36
1.7 Definitions of rules and principles as based on legal regulatory discussions 37
1.8 Chronology of the thesis 38
1.9 The intended contributions of this research 41
1.10 Conclusion 43
Chapter 2: Methodology and Methods 45
2.1 Objective for chapter and overview of content 45
2.2 Overall steps taken in this project 45
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2.2.1 Conducting literature review for the generation of initial item pool 47
2.2.2 Steps adopted in this project 47
2.3 Basic methodological assumptions underlying the research 49


3.4.12 Abstractness vs. concreteness 74
3.4.13 Need for procedural fairness 75
3.5 Conclusion 75
Chapter 4: Rules and Principles in Law 77
4.1 Introduction 77
4.1.1 Overview of the chapter 78
4.2 Formalism vs. Anti-Formalism 78
4.2.1 The problems with the formalism 80
4.2.2 Anti-Formalism 81
4.3 Justification of choosing Dworkin’s positions 81
4.3.1 Dworkin: A Philosophical Basis 82
4.3.2 Legal Positivism on rules 83
4.3.3 Dworkin’s attacks on Positivism 84
4.4 Dworkin’s position on rules and principles 85
4.4.1 Two distinctions between a rule and a principle 86
4.4.1.1 Recognition conditions: validity 86
4.4.1.2 Application Conditions: relevance 88
4.4.2 Rules and Principles interplay 89
4.5 Criticisms of Dworkin’s rules vs. principles 90
4.6 Distinguishing principles and rules from other concepts 91
4.6.1 Analogies vs. rules and principles 91
4.6.2 Heuristics vs. rules 93
4.6.3 Rights, policies vs. rules and principles 93
4.7 Conclusion 94
Chapter 5: Psychological roots of rules and principles 96
5.1 Introduction 96
5.1.1 Organisation of the chapter 97
5.2 The nature of dispositions 98
5.3 Literature review on parenting style 99

6.3.5 The role of Moderator and observer 123
6.4 The actual operationlisation of the focus groups 124
6.4.1The descriptive summary of the participants for 4 focus groups 124
6.4.2 The general questions which have been covered by the focus groups: 125
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6.5 Transcribing Focus Group data 126
6.5.1 Data Analysis 126
6.6 Discussions: results of the preliminary study 127
6.6.1 Key words 134
6.6.2 Summary of the analysis of the focus groups 135
6.7 Conclusion 136
Chapter 7: Framework of the dimensions underpinning disposition towards rules and
principles 137
7.1 Introduction 137
7.1.1 Overview 138
7.2 Overview of the 14 dimensions 138
7.2.1 The ethical dimension 138
7.2.2 The legitimacy dimension 140
7.2.3 Procedural Fairness 142
7.2.4 Concreteness vs. abstractness 143
7.2.5 Uniformity versus Flexibility 144
7.2.6 Need for certainty and predictability 145
7.2.7 Complexity 146
7.2.8 Need for security 147
7.2.9 Need for closure 149
7.2.10 Efficiency 150
7.2.11 Creativity 152

8.4.4 Limitations of online survey and our remedy 171
8.4.5 Testing people’s ability in distinguishing between rules and principles 171
8.5 Piloting: quantitative analysis 174
8.5.1 Sample size 174
8.5.2 On using students as research subjects 175
8.5.3 Normality distribution 175
8.5.4 Missing data 176
8.5.5 Internal consistency reliability 176
8.5.5.1 Reversed items 178
8.5.5.2 Ways to improve the Cronbach’s alpha 178
8.5.6 Cronbach’s alpha analysis for 28 subscales 178
8.6 Exploratory Factor analysis (EFA) 181
8.6.1 Factor loading and factor scores 183
8.6.1.1 The choice of rotation 183
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8.6.1.2 Checking for multicollinearity 184
8.6.1.3 Criteria for factor extraction and item removal 184
8.6.2 Initial principles component analysis on the 160 items 184
8.6.3 Rules and principles subscale (15 items) 188
8.6.3.1 Reliability of the rules and principles subscale (15 items) 190
8.6.4 An ad hoc analysis on the remaining items (resulting 13 items) 192
8.7 Conclusion 194
Chapter 9 Part one: Further refinement of the instrument 196
9.1 Introduction 196
9.1.1 The overview of the chapter 196
9.2 Preparation for the empirical study: some preliminary considerations 196
9.2.1 Objective of the current EFA 196

9.11.2.2 DRP and Need for closure 214
9.11.2.3 DRP and Sternberg’s thinking style 216
9.12 Summary of the convergent and divergent validity of the DRP 219
9.12.1 Convergent validity of the DRP 219
9.12.2 Divergent validity 220
9.12.3 Interpretation of the overall result 220
9.13 Discussion and Summary of the validity test results 222
Chapter 9 Part three: Predictive validity of the DRP 223
9.14 Predictive validity 223
9.14.1 Attitudes, behavioural intention and behaviour 223
9.14.2 A summary of eight scenarios 224
9.15 Part one: DRP and BI (correlation analysis and multiple regression) 226
9.15.1 The correlation analysis 226
9.15.2 Part two: The Multiple Regression analysis 228
9.15.2.1 Analysis for the professional scenarios 228
9.15.2.2 Analysis for the private life scenarios 231
9.15.2.3 Overall result and summary 233
9.16 Using DRP rules and principals scores as predictors 234
9.16.1 Two categories of scenario scores 234
9.16.4.1.1 Professional scenario analysis 235
9.16.4.1.2 Personal scenario analysis 237
9.16.4.1.3 Overall result and discussion 238
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9.16.2 Four categories of scenario scores 238
9.16.4.2.1 Professional context scenarios analysis 239
9.16.4.2.2 Personal context scenarios analysis 246
9.16.4.2.3 Overall result and discussion 249

10.5.3 Implication of DRP in policy-making 283
10.6 Future work 284
10.6.1 Scale structure 284
10.6.2 Examine the ‘fit & misfit’ effect 284
10.6.3 Examine the ‘priming effect’ 286
10.6.4 Examine the moderating variables 286
10.6.5 Using DRP in conjunction with verbal protocols 286
10.7 Conclusion 287
Appendices 288
Appendix 1 – Preliminary item pool (323 items) with respective source 288
Appendix 2- Introductory message for the online survey 311
Appendix 3- Descriptive Statistics for 323 items (including miss data analysis) 313
Appendix 4-Covering letter for the sample recruitment (preliminary items pool) 320
Appendix 5-Cronbach’s alphas for 28 dimensional scales 321
Appendix 6-Eight scenarios 333
Appendix 7-Other Psychometric scales were used in this project 338
Ten-Item Personality Inventory-(TIPI) 338
The Marlowe-Crowne Social Desirability Scale (MCSDS) 339
Thinking Styles Inventory—Revised II (TSI-R2) 340
Dialectical Self Scale (DSS) 344
Need for Closure Scale 346
Higgins RFQ 348
References 350 14


Table 19 Reliability of the principle subscale 190
Table 20 Reliability of the rules subscale 191
Table 21 Factor loadings of the ad hoc analysis of the minor factors 193
Table 22 Descriptive statistics of the 15 items from previous factor solution (n=474)
199
Table 23 Gender of the respondents 199
Table 24 Age range of the respondents 199
Table 25 Ethnic backgrounds of the respondents 200
Table 26 Factor loading of the final 10 items in DRP 201
Table 27 Reliability of the rules subscale 203
Table 28 Reliability of the principles subscale 204
Table 29 Gender statistics 206
Table 30 Ethnic groups DRP scores 206
Table 31 Three age groups DRP scores 207
Table 32 DRP and Higgins RFQ 211
Table 33 DRP and Socially desirability test 212
Table 34 DRP and DSS 212
Table 35 DRP and TIPI 213
Table 36 DRP and Need for closure 215
Table 37 DRP and Sternberg’s thinking style 217
Table 38 Correlations supporting the convergent validity of the DRP 219
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Table 39 Correlations supporting the divergent validity of the DRP 220
Table 40 Psychological profile of rules-based vs. principles based individuals 220
Table 41 Summary of the eight scenarios 225
Table 42 Descriptive Statistics of the eight scenarios 226
Table 43 Summary of the rules and principles correlations with eight scenarios 227

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18 List of Figures
Figure 1 Overview structure of the thesis 41
Figure 2 A flow chart depicting the DRP development processes 48
Figure 3 Reduction of the initial items pool via qualitative steps 168
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20 Author’s Declaration

Declaration of Originality

I declare that no portion of the work referred to in this thesis has been submitted in
support of an application for another degree or qualification of this or any other
university or other institute of learning.

I declare that the thesis embodies the results of my own work. Following normal
academic conventions, I have made due acknowledgements of the work of others.

Copyright Statement

Copyright of the text of this thesis rests with the author. Copies (by any process)
either in full, or of extracts, may be made only in accordance with instructions given
by the author.
Signature: ______

Printed Name: Ying Feng
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1.1 Introduction
This chapter provides an overview of the entire PhD project and reflects on the
research journey taken by the researcher. In the process, it will make clear both the
need and rationale for the study, and introduce the research design the researcher
intends to follow. This chapter is introductory and designed to give some overview of
issues.
1.1.1 The objective of the present PhD
The main focus of this PhD project is the development and validation of a
psychometric instrument for the measurement of individual dispositions towards rules
and principles. The grounding of the instrument development is inter-disciplinary, and
draws on debates concerning rules and principles in law, accounting and business,
social-psychology, and philosophy.
1.1.1.1 My prior research journey
The decision to develop such an instrument had two main inspirations. Firstly, in my
MRes research work I tried to use individuals’ ‘regulatory focus’ scores (see Higgins,
1997) to predict their behavioural responses to rules and principles-based scenarios. I
had expected that individuals’ regulatory focus orientations, as measured by Higgins’
regulatory focus questionnaire, would be a good proxy for the dispositions towards
rules and principles and capture a good deal of the variation in individuals’ responses
to rules and principles. My MRes results did not confirm the initial expectations. In
reflecting on MRes findings, I realised that various factors might plausibly be
expected to bear on individuals’ dispositions to rules and principles, and that whilst
there are various psychometric instruments that might reasonably be thought to be
relevant to the issue; there was no instrument tailor-made for the purpose of
measuring individual dispositions towards rules and principles.
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Secondly, prior studies suggested that individual dispositions, in addition to directly

1.3 Rules vs. principles after the Global Financial Crisis
The Global Financial Crisis (GFC) that began around middle of 2007 and continued,
in its most intense phase, until the end of 2008 resulted in the collapse of some major
retail and investment banks, and required governments to provide massive financial
support to a banking system on the verge of total collapse
1
(Barth & Landsman,
2010). The state of regulation was certainly not solely responsible for the financial
crisis, but it is commonly recognised as having been one of the factors that in
combination with others made it possible, and the crisis has thus given rise to calls for
significant reassessment of systems of financial regulation (Black, 2010, p. 2).
The recent shift to a more rules-based regulation can be seen as a reflexive response
to the loss of trust associated with the credit crisis (Ford 2010; Black 2008; Guiso,
2010). However, Ford (2010, p.22) argues that the principles-based regulation (PBR),
as such, did not fail in the face of the GFC. She suggests that the lesson we should
take from the GFC is that regulators failed to effectively implement PBR, failed to
participate actively and sceptically in the interpreting and monitoring process
necessary to the effective implementation of the PBR, and failed to sustain good
‘regulatory conversations’ with the regulated parties (Black, 2008). She notes that the
financial markets are too fast moving and complex to be regulated in a ‘command-and
control’ manner, and that we should not risk another Enron type of scandal associated
with gaming rules (Ford, 2010). Moreover, a straight-jacketed rules-based regulation
would be more likely to create a suspicious and low-trust environment since it
reinforces the perception that “if increased regulation is justified then the people
being regulated must be suspect; guilty before proven innocent” (Swinson, 2004, cited
by Arjoon, 2006, p.68). 1
For a timeline of the crisis, New York Times, “A Year of Financial Turmoil,” (11 September 2009)