This study attempts to review and analyse central banking in Pakistan. It has four objectives. (i) to discuss the role of the State Bank in the growth of commercial banks and the money market, (ii) to describe and analyse the operation of the commercial banks, (ill) to discuss the control of the money supply by the State Bank, and (iv) to examine the part played by the Bank in the setting up and operation of specialised financial institutions created to promote the development of agriculture and industry We begin with an account of the salient features of the Pakistan economy to enable readers not familiar with the country to see the banking system in its economic setting. We then go on to examine various facets of the organization, functions and operation of the State Bank, its relationship with the commercial banks and the reasons why it has failed to establish a money market. One of the functions of the State Bank is to control the money supply and in Chapter 5 we show why it has failed to do so and argue that, contrary to the Bank's own view, the absence of a money market is not the real explanation We shall show why it is that in Pakistan the conventional mechanisms for curtailing the money supply appear to have had an opposite effect. In the final chapter this analysis is extended to show how the public's desire to hold cash balances has been influenced by changes in the rate of interest payable on deposits In this chapter we also argue that the agricultural and industrial development banks' concern to provide cheap credit has restricted their ability to mobilise resources and made them unnecessarily dependent on Government and State Bank finance. We conclude by showing that the commercial banks could easily provide more finance for development without endangering their liquidity

The main objective of this thesis is to investigate takeover gains for UK bidding firms and offer a behavioural approach to empirical analysis. The main issues and key findings of the three empirical chapters are summarised as follows. Chapter 3 empirically investigates the hubris hypothesis for corporate takeovers (Roll (1986)). This thesis examines whether overconfident managers destroy shareholder value (in public deals) or whether their actions generally lead to lower wealth effects (in private deals) relative to rational bidders. Bidders’ short and long-term performance is also examined by employing, for the first time in a UK study, three different measures of overconfidence namely Stock Options, Multiple Acquirers and Business Press proxies. The results indicate that managers infected by hubris fail to generate superior returns than those generated by rational bidders, for all three proxies of overconfidence after controlling for various bidder and deal characteristics. We therefore argue that the well-documented destructive effect upon shareholder wealth of managerial overconfidence is not sensitive to the measure used for this behavioural bias (i.e. overconfidence). The Hubris hypothesis assumes a rational market-irrational manager framework while Shleifer and Vishny (2003) offer rational manager-irrational market framework and suggest that takeovers are driven by overvalued markets. Chapter 4 empirically investigates the proposal of Baker et al. (2007) who claims that ‘the irrational manager and irrational investor stories can certainly coexist’. Findings show that rational managers who announce takeovers in high valuation periods enjoy the highest abnormal returns while overconfident managers who announce takeover bids in low valuation periods cannot hide the poor quality or possible overpayment of their deals ending up suffering the highest losses. Lastly, Chapter 5 offers a behavioural approach to explain short –run bidder gains. Neoclassical theories suggest that the market reaction following the announcement of a takeover bid reflects either synergy or revaluation gains. Chapter 5 suggests that acquirers’ abnormal returns reflect a market overreaction. Results suggest that under conditions of low information uncertainty when investors do not possess private information, the market reaction is complete (zero abnormal returns) for any type of acquisition. On the other hand, under conditions of high information uncertainty, investors overweight their private information and overreact to takeover announcements. Therefore, they generate highly positive and significant gains following the announcement of private stock and public cash deals (considered to be ‘good’ news), positive gains following private cash acquisitions (also defined as ‘good’ news) while investors heavily punish public stock deals (classified as ‘bad’ news)

An important aspect of Islamic finance in the retail market has been the introduction of mortgage products for housing finance. These are offered by a number of banks in the UK. The aim of this research is to examine the characteristics of the UK market for Islamic mortgages and to analyse the activities of the major institutions involved. Supply and demand conditions are explored. This study evaluates the development of Islamic housing finance in the United Kingdom by focusing on the following main areas: First, it investigates whether there is any effective demand for Islamic Mortgages in the UK. Second, the study evaluates the perceptions of UK Muslims towards various aspects of Islamic mortgages and provides an empirical assessment of these perceptions. Also, the study analyses how Muslim client attitutes and the overall environment affects preferences for Islamic mortgage products. Third, it investigates the factors which might encourage or discourage home-buying among UK Muslims. Fourth, it investigates the current structures of Islamic mortgages and examines whether these play a role in helping low-income groups from the Muslim community to achieve home ownership. Fifth, it investigates the current practices surrounding Islamic mortgages to identify the obstacles and factors influencing decision making with the aim of suggesting possible remedies. The study also evaluates accessibility issues with the objective of defining effective ways of raising awareness in the Muslim Community. It also discusses the marketing of Islamic mortgages and investigates the importance of product awareness by bank staff. Furthermore, it explores in detail the role of religion, Muslim households’ consumer preferences and the prospects for Islamic banks cross-selling mortgage products to Muslim customers. Finally this study investigates the factors influences clients’ choices of Islamic mortgage providers. In fulfilling its aims and objectives, this study has utilized both primary and secondary data from the UK. A survey questionnaire was conducted among the Muslim community in London. Non-parametric procedures and tests have been used to analyze the data collected. The findings of the study demonstrate that there is a gap in home ownership among British Muslims compared to the general public, which is determined by affordability, financial exclusion and information gaps. In addition, this study found that there is substantial potential demand for Islamic mortgages in the UK, which requires effective but also sound marketing strategies. Perception and opinion analysis also indicated that wider social factors and lifestyle choices may be increasing the demand for Islamic mortgages. Moreover, the findings also demonstrate that perceptions of Islamic mortgages are similar between different ethnic and tenure groups. Some Muslim ethnic groups are more willing than others to take on an Islamic mortgage even if it is more expensive than a conventional mortgage. The study concludes that the prospects of Islamic mortgages in UK are promising and, unlike conventional bank mortgages, they are not financed by borrowing from wholesale markets, but rather from Islamic deposits. Islamic housing finance has proved sustainable, and has not been subject to the problems associated with sub-prime defaults. On the other hand a careful risk appraisal by Islamic institutions providing housing finance has made it more difficult for low-income Muslims or those with less secure employment to obtain Shariah-compliant mortgages.

The recent proliferation of hedge funds suggests that capital markets present windows of opportunity to realise substantial arbitrage profits thus violating the 'no arbitrage’ condition of efficient markets. This thesis examines several observed return patterns that have raised questions about the efficiency of capital markets and/or the validity of the asset pricing models used to analyse them. The study focuses on the Japanese stock market which is under-analysed despite being the second largest in the world. We first look at three stock attributes that can arguably differentiate between future winners and losers. These are size, price and book value to market. In contrast to older studies, we find no significant evidence of a size effect. The price and book value to market effects however are statistically significant although both appear to be cyclical in nature suggesting that they are at least partially driven by macroeconomic risk factors and so are not pure anomalies. The short term reversal of stock returns is investigated next. Unlike previous studies, a strategy that utilises optimal investment portfolios is simulated. By avoiding previously documented methodological problems, it is shown that contrarian profits are statistically and economically significant and that they are overwhelmingly attributed to investor over-reaction to firm-specific events, implying that significant short term inefficiencies occur in the Japanese stock market. Finally the effectiveness of the law of one price and its implications for the relative pricing of assets is examined. It is shown that the returns of securities with similar systematic risk are highly correlated and their relative prices oscillate around an equilibrium value. Large deviations from that value can be exploited by a trading strategy known as pairs trading. Simulations of several strategy variants generate statistically and economically significant profits which are not attributable to systematic risk. It is concluded that relative stock prices are not always efficient in the short term. Such inefficiencies can be profitably exploited as prices are eventually driven to equilibrium.

This research aims to investigate the enhancement of accounting quality in Thailand after adopting International Financial Reporting Standards (IFRS) in its domestic accounting system. The accounting quality consists of three properties of earnings– earnings persistence, value relevance and earnings timeliness. This research examines the improvement of accounting quality after the IFRS adoption in Thailand by expanding the conditioning institutional factor to include the magnitude of book-tax differences. In addition, the relationship between the Thai accounting quality and firm governance systems is investigated. The results reveal that the accounting quality, including earnings persistence and value relevance, has been improved after the IFRS adoption in Thailand. The earnings timeliness is observed in Thai firms, but it has been declined after the IFRS adoption. The results also indicate that the improvement of accounting quality after the IFRS adoption in Thailand is varied according to the magnitude of book-tax differences. This research finds that the firm governance system is related to the improvement of accounting quality in Thai settings. This research concludes that the adoption of IFRS has generally improved accounting quality in Thailand. The book-tax difference contains significant information about accounting quality in Thai settings. And, the firm governance system plays an important role in accounting quality after the IFRS adoption in Thailand.

This thesis investigates the role of information uncertainty in determining the stock price performance and managers' equity nancing decisions. The previous literature documents the experimental evidence of significant impact of information uncertainty on investors' preference and decision making. The first empirical examines the interaction effect between information uncertainty and underreaction anomaly in UK stock market. The empirical evidence is consistent with behavioral finance theory that stocks with higher information uncertainty have greater abnormal adjusted returns, especially following bad news. Chapter 4 further tests the role of information uncertainty in cross-sectional stock returns within 30 global stock markets. The evidence confirms my conjecture that both growth options and information asymmetry are attributes to the information uncertainty. The empirical findings show that stocks with higher information uncertainty have lower future stock returns after controlling for information asymmetry and other characteristics of market and firm. Chapter 5 reports a positive correlation between information uncertainty and probability of equity issuance among industry firms in US market. The evidence shows that information uncertainty does not only affect the stock price performance, but also have in uence in managers' equity financing decisions. Overall, our empirical work contributes to the literature with conclusive evidence that information uncertainty amplifies the extent of stock mispricing, which is consistent with behavioral nance and is in contrast to predictions of neoclassic finance theory.

This thesis empirically investigates financial and investment decisions of banks and bank holding companies in a managerial behavioural approach with a view to ascertaining to what extent managerial psychology is as important as managerial incentive a determinant affecting the process of instituting an efficient bank governance mechanism. A large sample of US banks and bank holding companies over 1996-2006 is examined for the effects of irrational and powerful bank Chief Executive Officers (CEOs). Integrating the analyses of both corporate governance and corporate finance, the thesis uncovers evidence that overconfident, dominating and overconfident-dominating bank CEOs have negative impact on bank financial decisions, such as M&As, payout policy and risk taking as they tend to overestimate their ability and underestimate possible risks of invested projects. Cognitive failures of this origin would have the worst fallout effects when the overconfident CEOs are also dominating the boards. Deploying Holder 67 and CEO-Chair as proxies for overconfidence and dominance factors respectively, the study shows that overconfident, dominating and overconfident-dominating CEOs are more likely to perform mergers with dubious quality, particularly in activity and geography diversifying mergers. The one- and two-year negative post-merger performance of banks ran by overconfident, dominating and overconfident-dominating CEOs bolsters the argument that mergers undertaken by these CEOs are economically undesirable. For the effects of psychological and cognitive biases on bank payout policy, results show that overconfident and overconfident-dominating CEOs are negatively related to the dividend payout ratio and total payout ratio. The negative association becomes stronger when the banks under examination have a higher degree of information asymmetry or with less growth opportunity. Evidence also confirms that CEO overconfidence, dominance and especially overconfidence-dominance have negative effects on bank risk control. CEOs with these attributes have a higher propensity for taking some bank-related risks, such as market-based risk, earnings volatility, credit risk and default risk. Overall, findings of this research suggest the essentiality of taking account of managerial psychological biases in reforming the existing bank governance mechanism, especially in designing appropriate compensation packages for executives and the desirable board composition for banks with overconfident-dominating CEOs.

During the last two decades, the way credit is handled has profoundly changed on both the demand and supply sides, mostly due to the new role of collateral assets. On the demand side, household debt that is collateralized with real estate, cars, and other tangible assets has reached record levels. On the supply side, the use of collateralized credit has become widespread. Banks now use collateralized credit for a number of purposes such as risk management, issuing fees, etc., and a new type of lender has entered into competition with banks through the use of assets instead of deposits for credit generation. These modifications, coupled with a stable financial environment and low interest rates, have led to the issuance of considerable amounts of collateralized credit. All these changes have macroeconomic implications, either creating new risk or magnifying existing financial systemic risk. To study the increased demand for household credit, I develop a theoretical model of the macro dynamics of households, with financial stability moderated by asset prices. I show that household real estate debt has quantifiable drawbacks in terms of financial stability. To study the supply of credit, I examine the link between collateral assets and financial stability in two ways. First, I develop a theoretical model of the dynamics between financial stability and assets used as collateral for bank debt. I show that a simple link exists between the price dynamics of bank loan collateral assets and optimal leverage of the financial system. Second, I empirically investigate the characteristics of lenders that do not hold deposits, also called asset-based credit institutions, since they substitute deposit liquidity with short loans securitized by assets. I show that in liquidity generation, risk, and market discipline, asset-based credit institutions mostly behave like banks.

The sole use of price and related summary statistics in a technical trading strategy is an anathema to weak-form market efficiency. In practice, however, traders actively use technical analysis to make investment decisions which makes this an important, but often neglected, area for study. This thesis includes four empirical chapters, which provide important evidence on the profitability of technical trading. The results from the detailed analysis undertaken in this thesis have broad relevance to both academics and those in the investment community. Existing research has been predominantly confined to evaluating basic technical trading rules, such as moving averages. Crucially, this ignores chart patterns. Widely employed by practitioners, such patterns form a vital part of technical analysis. As the most important price pattern, the head and shoulders pattern is subjected to detailed and thorough examination in this thesis. A significant contribution is made by evaluating formations recognised and used by traders, in sharp contrast to limited existing studies. Furthermore, a new method is developed to establish how quickly profits from a head and shoulders strategy decay, which has important implications for traders. Existing research has identified both reversal and relative strength effects in financial asset returns. A key separator between these two findings is the formation and holding time over which portfolios of winners and losers are evaluated. Motivated by this, a very large sample of ultra high-frequency data is used to investigate intraday momentum and reversal effects. As well as being an important contribution to research in this field, the results are, once again, of relevance to practitioners. The need for further research into technical analysis is clearly demonstrated by point and figure charting. Whilst traders have made consistent use of the technique for around a century, the amount of existing research is extremely small. Point and figure has attractive data filtering properties, clear trading rules and is particularly suited to intraday technical analysis. Again, using a very large sample of high-frequency data, a detailed evaluation of the profitability of a point and figure trading strategy is undertaken.

Islamic banking and finance has shown progressive development all over the world since its inception as a commercial banking model in mid-1970s. Indonesia, as the largest Moslem nation in the world, has initiated some policies to expand the Islamic banking industry in the country. Similar to conventional banks, Islamic banks face a number of risk areas, which may affect their performance and operations. One of such risk areas is liquidity risk, which shows additional features in the case of Islamic banks. Both the international banking standards and the Sharia guidance suggest that banks should have: robust liquidity risk management policies, a responsive asset and liability committee, effective information and internal control systems and, methods for managing deposits to reduce on-demand liquidity, to manage liquidity risk. The aim of this research, hence, is to analyze the management of liquidity risk in Islamic banks through balancing assets and liabilities with the ultimate objective to recommend policies to improve the management of liquidity risk. This aim is fulfilled in the case of Indonesian Islamic banking industry. The data collection and analysis method in this research involve triangulation method with a combination of quantitative and qualitative methods to achieve such aim and objective. Particularly, both the performance analysis of the industry and the econometric time series analysis were conducted to analyze the liquidity risk and its management for Islamic banking, which includes the liquidity behavior of banking depositors and Islamic banks. In addition, the primary data through questionnaire survey was also assembled with the aim of knowing the actual practices and problems of managing liquidity risk. It was investigated from the perceptions of Islamic banking depositors and Islamic bankers to shed further lights on the liquidity risk issues, which were not captured in the time-series analysis. The empirical analyses conducted in this research demonstrate: (i) the non optimal organizational structure of Islamic banks to manage liquidity, (ii) the significant demand for liquidity withdrawals from depositors and fragility of Islamic banks to mitigate certain scenarios of liquidity withdrawals, (iii) critical factors explaining liquidity behavior of banking depositors and Islamic banks, (iv) reasons for depositors to withdraw funds from Islamic banks and the non ideal management of funds by Islamic banks and, (v) the limited Islamic money market instruments to manage the demand for liquidity from depositors. Based on these findings, the research then constructs an integrated and comprehensive program to manage liquidity risk, which consists of three elements: (i) institutional deepening, (ii) restructuring the management of liquidity on the asset and liability sides and, (iii) revitalizing the usage of Islamic liquid instruments. This integrated and comprehensive program of liquidity risk management recommends a better way of managing liquidity risk based on Sharia compliant instruments and international standard banking practices