The financial friction is shown to depend on the corporate balance sheet condition, bank capital ratio, and liquidity premium. Given the banks' liability composition is constant, the higher the liquidity premium, the larger is the EFP.  Similarly, given the liquidity premium is constant, EFP is larger when higher proportion of loans is produced or financed with bank capital. Based on this framework, we are able to establish the link between the bank capital channel and the model's transmission mechanism subject to exogenous shocks.  Results indicate an active bank capital channel amplifies and propagates the monetary policy shocks (demand shock) while it attenuates and dampens the technology shocks (supply shock) when households' deposit is contracted in nominal term.

In section two of the thesis the objective is to show that the degree of inflation persistence -- that is the extent to which an inflation shock does not fade away in subsequent quarters -- is not an inherent fixed characteristic of an economy, but if fact depends on the stability and transparency of the monetary policy regime in place. Given the large econometric evidence of high inflation persistence for the US and other OECD countries, many macroeconomists have concluded that high inflation persistence is a 'stylised fact' and that furthermore it is evidence for a 'New Keynesian' Phillips Curve in which inflation depends to a high degree on past inflation -- 'nominal rigidity'. To examine these claims for the UK, I begin by estimating regressions of inflation on its own past values for separate sample periods, for each of which the monetary policy regime was different.

The thesis comprises eight chapters. Following the introduction, the hypothesis of the thesis are presented. Then, the literature review outlines the studies that have touched upon the issues addressed in the thesis. Next, the methodology of the research is discussed. The results of the research are examined in the next three chapters, with concluding remarks provided in the final chapter. The reported evidence implies that the explored recommendations of The Code of Best Practices (Cadbury, 1992) are ineffective, in most of the cases, at mitigating the agency disclosure problem. Indeed, there is evidence that suggests that these recommendations may actually have an adverse impact on the accuracy of analyst earning forecasts. This is evinced by the fact that a greater proportion of non-executive directors on the board of directors, and higher institutional ownership, seem to be associated with less accurate analyst forecasts. Finally, the evidence suggests that research and development seems to have an embedded nature in firm-specific characteristics, having a weak impact upon the analysts' forecast error in the context of an ordinary least square regression only. However, analysts seem to be more accurate for firms with higher capital expenditure. Overall, the findings of the thesis make a contribution to three different streams of the literature; namely, the corporate governance, the intangible assets, and the analyst forecasting literature.

This thesis addresses three issues in international macroeconomics. Chapter 2 provides an empirical investigation of both the short- and long-term determinants of current accounts for the eight largest emerging Asian economies. The analysis is carried out within a cointegrated VAR framework. In this chapter, I show that current account behaviours in emerging Asian economies are heterogenous. Initial stock of net foreign assets and degree of openness to international trade are important factors in explaining the long-run behaviour of current accounts. Moreover, the current accounts of all sample economies have a self-adjusting mechanism except China. Short run current account adjustment towards long-run equilibrium path is gradual, with the disequilibrium term being the main determinant of the short-run current account variations. Chapter 3 analyses current account sustainability of the short-run sample economies included in Chapter 2 in the context of the intertemporal budget constraint approach. Both strong and weak form tests of current account sustainability are performed in the study. Based on more generalised sustainability conditions, all the sample economies are found to be on a sustainable current account path. In addition, I find that accounting for endogenously identified structural breaks increases the instances of cointegration between an economy's exports and imports, which are more in favour of current account sustainability. Chapter 4 uses a three-country general equilibrium model to investigate the importance of consumption bias in generating equity portfolio bias. I find that the optimal holdings of non-traded goods equities are only affected by the separability between traded and non-traded goods, while optimal holdings of traded goods equities are determined by the household's preferences over domestic and foreign traded goods.

No description available.

This thesis is about measuring and interpreting banking efficiency in China. It consists of three empirical essays that use Data Envelopment Analysis (DEA) in three novel ways to measure inefficiency. The first essay measures cost inefficiency of the 14 nationwide banks over the period 1997-2006. A rational model of rent-seeking behaviour is used to explain part of the cost inefficiency. Cost inefficiency is decomposed into X-inefficiency and Rent-seeking inefficiency and the latter is interpreted as symptomatic of rational decision making by the Chinese bank manager. The efficiency estimates are obtained from a Simar and Wilson (2000a) proposed bootstrap method. A second stage regression model explains that the rate of decline of the inefficiencies is faster for the joint-stock commercial banks (JSCBs) than for the state-owned commercial banks (SOCBs). The second essay, estimates total factor productivity (TFP) growth for SOCBs, JSCBs and city commercial banks (CCBs) for the period 1997-2007. The method of estimation is the Malmquist bootstrap method. This study finds that TFP growth did not improve significantly in the run up to WTO. Technical innovation was dominated by the big banks and efficiency gains were dominated by the CCBs. The third essay uses a network DEA (NDEA) framework to analyse profit efficiency between three profit centres within the bank, namely consumer, corporate and Treasury banking. The internal efficiencies of the state wide banks are analysed for the period 2007-2009. The study demonstrates the value of the NDEA method in aiding the manager to identify areas of inefficiency within the internal flow of funds of the bank. The results show Treasury operations have the lowest efficiency. This is partly caused by restrictions on the loan-deposit ratio that forces the banks to hold lower yielding other earning assets through their Treasury operations.

The primary objective of this thesis is to investigate the effects of takeover bid announcements on the value of bidders that engage in domestic and cross-border acquisitions. The empirical chapters focus on three major Issues. They are: (a) the Implications of International variations in corporate governance systems, (b) the roles of market valuations, economic conditions and exchange rate changes, and (c) the effects of ambiguity in the valuation of unlisted targets, on the wealth of shareholders of bidding firms. Evidence from all chapters, while revealing that bidders' gains vary significantly with several firm and transaction specific characteristics, strongly confirm the deterministic power of the key Issues examined. Specifically, the findings discussed In chapter 3, not only confirm that bidders tend to enjoy higher short-run gains from acquisitions of (a) listed and subsidiary targets that based In civil-law countries and (b) stock financed acquisitions of targets that based in common-law countries, but they also suggest that bidders perform relatively better In the long-run when the targets are based In common-law countries. The results reported and discussed in chapter 4 show that bidders' shareholders enjoy higher announcement gains from domestic than from foreign takeovers only when the bid is announced during periods of low market valuation, high levels of economic growth, and weak effective exchange rate. On the contrary, acquisitions made during periods of high market valuation and strong effective exchange rate yield higher abnormal returns to shareholders of acquirers of foreign than domestic target firms. The results also confirm that whereas market valuations and the effective exchange rate have similar effects on bidders' post-merger performance, the effects of economic growth tend to reverse after three and five years following the bid announcement. Evidence discussed in the final empirical chapter (chapter 5) suggests that the gains of bidders engaged in acquisitions of unlisted targets are shaped by the degree of difficulty surrounding the valuation of these targets. Bidders' shareholders enjoy higher announcement gains when they acquire less value-ambiguous unlisted targets. Acquisitions of (a) mature and (b) large unlisted targets generate higher (lower) short-run (long-run) returns to shareholders of bidders. In addition, bidders of unlisted targets laden with intangible assets generate low short-run returns but perform better in the long-run. Overall, the findings of this thesis show that the gains of bidders based In the UK are not only affected by transaction and firm specific factors but also by the corporate governance system of the country In which the targets are based, the stock market conditions, economic situations and exchange rate movements at the time of bid announcement, as well as the difficulty Involved in valuing the targets.

This thesis examines how firms’ financial flexibility affects the profitability of three of the most commonly used style investing strategies. They are the value-growth trading strategy (going long on stocks with high Book-to-Market ratio and short on stocks with low Book-to-Market ratio), the momentum trading strategy (going long on stocks that have performed well and short on stocks that have performed poorly recently), and the accruals based trading strategy (going long on stocks with low accruals and short on stocks with high accruals). The findings suggest the value premium exists when controlling for risks using the Fama and French three factor model. However, it is explained when the risk factors are conditioned on firms’ investment irreversibility and the business cycle. Next, the momentum profit can be explained by (a) adjusting returns for risks using the Fama and French model that is conditioned on firms’ financial constraints and the business cycle, and (b) accounting for the interaction between the momentum profit and firms’ investments beyond the risk-return relationship. Finally, the accruals based trading strategy is most successful at the two ends of the financial inflexibility spectrum, supporting both an explanation based on the risk-return relationship and an explanation based on the catering theory. When controlling for the cyclicality in stock returns, the strategy ceases to be profitable. The results suggest that the understanding of corporate investment decisions can help improve the understanding of securities markets and portfolio investment strategies. There are a few lessons that investors can learn from the findings of this thesis. Value-growth investors should focus on value and growth firms with high investment irreversibility gap. Momentum investors should pursue the trading strategy among firms with high financial constraints and during economic upturns. They could also benefit from forming their portfolio from past winners and past losers with high investment gaps. Accruals based investors would benefit from pursuing the strategy among firms with high investment and financing flexibility and during economic upturns.

This thesis investigates the stock markets in the GCC countries from three distinct but related dimensions. First, we empirically explore and identify the main macroeconomic variables that affect the movement of these stock markets. Second, we investigate the impact of stock markets and banking sector developments on the process of economic growth in these countries. Finally, we examine the impact of stock markets’ development on the financing choices of firms operating in these markets and identify the determinants of their capital structure. The three above-mentioned areas of research are motivated by several reasons. First, given that the development of a well structured financial system has taken place in these countries only over the last thirty years, the empirical studies related to the financial development in the GCC countries are rare. Second, GCC countries have been largely ignored in the earlier empirical financial economics literature which bestows originality on our empirical work, specially, in the context of stock market development. The rapid growth in the GCC countries' stock markets over the past two decades raises empirical questions regarding the fundamental connection between stock markets growth and the key macroeconomic variables and how these developments feed into the real economic activities. Third, the GCC countries are non-tax paying entities which make them an interesting case to investigate whether the determinants of the capital structure of firms operating in these markets are similar to those operating in the developed and industrial countries. For example there is not a single published study which examines and compares the capital structure of firms listed in the GCC stock markets or the stock markets development and firms financing choice in these countries. The empirical results reveal the following: (1) both global and local macroeconomic variables affect the performance of stock markets in the GCC countries. (2) Both stock markets and banking sector positively influence economic growth process and they are complementary rather than substitutes for each other. (3) Stock markets in the GCC countries have become more developed and considered an important tool for corporate financing decisions. Moreover, corporate capital structure in these countries can be explained by the determinants suggested in corporate finance models.

This thesis stimulated and inspired by failings in the current literature investigates a series of issues relating to the UK Equity Risk Premium Puzzle. The UK market is focussed upon given prior research is heavily concentrated on the us market. The prior literature also focuses upon the aggregate equity premium. This thesis makes another important extension to prior work by analysing the equity premium for portfolios formed on cross-sectional characteristics such as size or industry. Specifically, it addresses the following three main issues. Firstly, is the historical equity premium an appropriate proxy for the expected equity premium? Secondly, does the use of the ex-post equity premium overstate the magnitude of the ex-ante equity premium puzzle? Thirdly, do low frequency equity returns follow different regimes over time? The main results indicate that the alignment of ex-post equity returns with fundamental measures of equity returns depends upon both the time period considered and the measure of fundamental used. Empirical evidence also supports the view that the expected equity premium follows different regimes and thus does vary over time. This low-frequency time variation in expected returns appears to, in general, be systematic, affecting portfolios within the market at a similar time. Our results contribute to the academic literature and also have important implications for practitioners by offering insight into the nature of the Equity Premium Puzzle and the appropriateness of using ex-post returns as a proxy for ex-ante returns.