Paper Example on Canada's Economy: Service vs. Goods-Producing Sector

Introduction

The Canadian economy comprises two sectors, which include the service industry and the goods-producing sector (Stecy-Hildebrandt et al., 17).The service sector consists of both commercial and non-commercial activities. The commercial activities are recreation, restaurants, communications, transport, real estate, insurance, and utilities. The non-commercial Sector in Canada comprises health and welfare, charity and religion, and education (Stecy-Hildebrandt et al., 4). According to Stecy-Hildebrandt et al., the rise in the Canadian service sector is a natural process that results in sustained economic growth and high-quality jobs. Ontario is the Canadian largest economy. It is the most populated province in Canada. According to the Canadian Census of 2016, the permanent residents of the Ontario province were approximately 14.19 million (Malakieh 8).

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The service sector in Ontario province makes up to 77.9% of its economy (Malakieh 13). The industry employs around 5.3 million people or 79% of the residents (Malakieh 23). Examples of the Ontario province's primary services include financial services, arts, and culture, scientific and professional services. The financial sector alone provides more than 370,000 direct job opportunities to the residents of the Ontario province (Watson et al., 21). According to Watson et al., Ontario is currently the financial center of Canada, with 12,000 financial services firm. These organizations offer multiple services, such as retail banking, leading services, wealth management, and payment processing services. Generally, the study would focus on the financial services sector in Ontario. The province's financial services have been growing faster than the average benchmark of the entire country’s economy. The industry comprises three service industries. These industries include banking, capital markets, and insurance. Banking services include retail banking, commercial banking, and credit cards. The capital market comprises investment banking, equity research, asset management, wealth management, venture capital, and private equity. Insurance services include life insurance, health insurance, reinsurance, property, and casualty insurance. According to Arner et al., Ontario Province has the largest concentration of banks, capital markets, and insurance firms in the world. Therefore, the study aims at determining the factors that affect the performance of the financial sector within the Ontario Province.

Research Objectives and Problem Statement

According to Arner et al., Ontario Province has some of the world's highest-ranked financial service sectors. The performance of these business sectors is critical because of the high contribution they make to the economy of not only Ontario but also for the whole of Canada. Therefore, there is a need to focus on the performance trend of these financial sectors and factors that affects their performance in terms of profitability, stock values, quality, among other aspects. Therefore, the research's primary objective is to investigate the performance trend of the financial services sector in the Ontario province and factors that contribute to the success or failure of those organizations. Specifically, the study would be focused on the following aims:

1. To determine the Performance trend of the financial services sector in Ontario for the last five years
2. To determine the extent to which technological innovation affects the performance of the financial services sector in Ontario Province
3. To determine the extent to which government regulations affect the performance of the financial services sector in Ontario Province
4. To examine whether inflation levels affect the performance of the financial services sector in Ontario Province.
5. To determine the extent to which population size affects the performance of the financial sector in Ontario Province.

Research Questions

The study would be guided by the following research questions in achieving the set objectives:

1. How has the financial services sector in Ontario been performing for the last five years?
2. To what extent has technology innovation affected the performance of the financial services sector in Ontario for the last five years?
3. To what extent do government regulations affect the performance of the financial services sector in Ontario?
4. To what extent does population size affects the performance of the financial services sector in Ontario Province?
5. To what extent do inflation levels affect the performance of the financial sector in Ontario Province?

Significance of the Study

The study is critical for both the government and private investors, especially those in need of investing in the financial service sector. The governments of various countries would utilize the study to formulate and implement favorable policies to promote a conducive environment for the financial services sector. Understanding the factors affecting the performance of the financial industry like inflation would be critical to the governments and central banks when formulating and implementing fiscal and monetary measures to control inflation levels within the economy. More so, the understanding of the effects of the population size, regulations, and the way other variables affect banks' performance is essential for investors because they can use the knowledge to determine the best economies or countries to risk their capital, especially on the financial services industry. Therefore, this research is ideal for the Canadian government and the governments and private sectors of other countries because the financial sector is essential for any economy across the world.

Literature Review

Multiple scholars have explained the growth and performance of the financial sector. The endowment theory, for instance, explains the role played by geographical location in the production of the financial industry (Altar et al., 16). According to the theory, European settlers in countries like Canada and New Zealand formed financial institutions to protect their private property and transfer wealth from the colonies to their home countries (AlKhouri and Houda 21). This way, the financial service sector in such countries grew fast because of the critical role in the colonies. The second theory that explains the financial performance and growth is Financial Theory. According to Christopoulos et al., the countries in which legal systems prioritize creditor rights and effective contract enforcements experience high growth in the financial sector. Inflation is also a critical determinant of performance in the financial industry. The research by Buallay explains the relationship between inflation and the return of the financial sector. According to Arcelli and Maria, there is a negative relationship between inflation and the growth of the financial industry. Economies with a rising rate of inflation experienced negative growth and performance in banks and other financial institutions. The role of technology innovations in the production of banks is also very critical. By utilizing communication and information technology in the financial sector, high-quality services are offered using fewer efforts, hence, enhancing the performance. According to Dunbar and Amy, the use of technology in banks increases a substantial competitive advantage because those that lack such innovations perform less than those banks that utilize modern and recent technology in their operations. Walsh and Olalekan also reveal that technological innovation has become the main factor in increasing the financial sector's performance levels. Depending on how the financial industry utilizes technology and market gaps, the population size may affect the organization's performance. According to Dunbar and Amy, the demand for financial services is not necessarily affected by the population change. Those firms located in areas with declining population requires to adopt new business opportunities, technology, and expanding the services. However, if financial service providers cannot cope with technological innovations, the decline in population would automatically lead to a reduction in profit levels. However, a rise in population is likely to increase the sector's customer base, leading to an increase in the financial service sector's performance levels.

Methodology

The study would be organized into six chapters. The first chapter would is an introduction that would provide an overview of the topic, objectives, research questions, and significance of the study. The second chapter is the literature review, which explains various research related to the subject of the study. The third chapter is the methodology. It provides the data variables, data collection procedures, and how the data would be analyzed—chapter four include data analysis using various statistical methods. The fifth chapter is the discussion of the results. Finally, the last section would comprise the conclusion, elections, and recommendations based on the data and the literature.

Data Collection Procedure

The variables that would be used in the study include the performance of the financial sector, inflation levels, technology innovation, government regulations, and population size. This research would involve mixed methods, whereby both primary and secondary data would be collected from various financial institutions located within the Ontario Province in Canada. Five financial organizations would be randomly selected for this study. The organizations would include banks and insurance companies. Then, questionnaires would be administered to the managers of the selected financial service organizations. The data would then be sorted and analyzed using excel and SPSS tools. The regression and correlation analysis would be run to determine the relationship between dependent and independent variables. The trend would also be determined using graphs and charts.

The secondary data would include the company's financial data for the last five years. The information would display the performance of the company regarding profitability and stock performance. The analyzed data would be compared with the literature, and the conclusion would be made based on the results.

Works Cited

AlKhouri, Ritab, and Houda Arouri. "The effect of diversification on risk and return in banking sector." International Journal of Managerial Finance (2019). www.semanticscholar.org/paper/The-effect-of-diversification-on-risk-and-return-in-Al-Khouri-Arouri/304fe34e09eb68adf84475f77d7fd25ac13b9ebe

Altaf, Mohsin, et al. "Successful Entrepreneurial Process as Contributor towards Business Performance in Banking: Moderating Role of Passion for Inventing." South Asian Journal of Management Sciences 13.1 (2019): 13-40. www.onlinelibrary.wiley.com/doi/abs/10.1111/j.1467-6486.1993.tb00327.x

Arcelli, Angelo Federico, and Maria Fernandes. "Open Finance: A Game-changing Reform." (2020). www.oliverwyman.com/content/dam/oliver-wyman/v2/publications/2020/apr/Conference%20Report_Rome2019.pdf

Arner, Douglas W., et al., eds. Systemic Risk in the Financial Sector: Ten Years After the Great Crash. McGill-Queen's Press-MQUP, 2019. www.mqup.ca/systemic-risk-in-the-financial-sector-products-9781928096894.php

Buallay, Amina. "Is sustainability reporting (ESG) associated with performance? Evidence from the European banking sector." Management of Environmental Quality: An International Journal (2019). www.researchgate.net/publication/325586707_Is_sustainability_reporting_ESG_associated_with_performance_Evidence_from_the_European_banking_sector

Christopoulos, Apostolos G., et al. "Assessing banking sectors’ efficiency of financially troubled Eurozone countries." Research in International Business and Finance 52 (2020): 101121. www.researchgate.net/publication/340454387_European_Banks_Performance_and_EfficiencyDunbar, G...