Of the massive amount of failures experienced in corporate history, not every failure or banking distress has triggered a panic among market actors, which were just deemed as ‘bad apples’. On the other hand, there have been numerous instances where the weaknesses in economic fundamentals led to the breakdown of cooperation among market actors in the shape of bank runs. This research proposes an alternative reading of bank runs by its emphasis on ideas, not to replace but rather to supplement the explanations put forward by the banking panics literature. It analyses bank runs from a political economy perspective and highlights the role played by ideas. While not discounting the significance of the material and institutional settings, it suggests the use of cognitive heuristics by depositors during decision-making under uncertainty. Accordingly, depositor awareness towards the safety nets in place and collective memory of the past institutional failures are suggested as the two reference points (in addition to fundamentals) for depositor expectations to converge towards. This theoretical argument is tested with the banking crisis of 2007-09 in the United Kingdom with the aim of uncovering the following research puzzle: Within the period under examination, out of the four bank failures, namely Northern Rock, Bradford and Bingley, Alliance and Leicester, HBOS, only the first two experienced bank runs (although different in type) which resulted in their failures. The research objective of this thesis is, therefore, to explain and understand the motivations behind these depositor runs. With regards to research methods, empirical chapters apply a fully qualitative analysis –process tracing, within-case and cross-case analyses- and also utilise from counterfactuals in explaining depositor behaviour.

Banks are often excluded in corporate finance research mainly because of the regulatory concerns. Compares to non-bank firms, banks are heavily regulated due to its special economic role of money and the uncertainty. Heavy regulation on banks could reduce the information asymmetry between the managers and investor by limiting the behaviour of banks at the time of the Seasoned Equity Offering (SEO), and by increasing the incentive for banks to avoid excessive risk-taking. Therefore, the market may be less likely to assume that bank issued securities signal information that the bank is overvalued compared to their non-bank counterparts. The objective of this thesis is therefore to examine commercial banks issued securities announcement effect. Three interrelated research questions are addressed in this thesis: 1) What is the difference in convertible bond announcement effect between banks and non-banks firm? 2) What is the difference in SEO announcement effect between banks and non-banks? 3) How do the stringency levels of bank regulation impact on the announcement effects of bank issued SEO? By using the U.S. convertible bond and SEO data from 1982 to 2012, I find that the bank issued a convertible bond and SEO announcement experience higher cumulative abnormal return than non-bank. This is consistent with the view that bank regulation reveals positive information about banks. Since banks are heavily regulated, the market is less likely to assume that the issuance of the convertible bond and SEO by banks signals information that is overvalued. These results are robust after controlling for a number of firm-, issue-, and market-specific characteristics. These results are robust by considering the different categories of non-bank industries by undertaking tests in relation to the differences in the CARS upon convertible bond/ SEO across industries, as well as the unbalanced sample between banks and non-banks by using the matched sample analysis. However, the relation between the stringency level of bank regulation and bank issued securities announcement effect may be nonlinear. As hypothesised, I find that bank regulation has an inverted U-shaped relation with the announcement effect of bank SEO by using the SEO data across 21 countries from 2001 to 2012. Under a less bank regulation environment, the market reacts more positively to the bank SEO announcement for an increase in the level of bank regulation. However, the bank SEO announcement effects become more negative if the bank regulation becomes too stringent. This inverted U-shaped relationship is robust after I use the exogenous cross-country, cross-year variation in the timing of the Basel II adoption as the instrument to assess the causal impact of bank regulation on SEO announcement effects. However, the stringency of regulation does not have a significant impact on the announcement effects of involuntary bank equity issuance.

This thesis contains three studies in financial economics. The first study explores the relationship between CEO compensation, bank performance and risk taking in European banks using a panel data set of 63 banks in 15 countries during 1992 to 2010. The major finding is a positive relationship between performance and compensation, but also a negative relationship between short time incentive and risk. We argue that such relationship is not causative, and bonus may not induce risk taking. The second study examines the efficient market hypothesis and forward premium puzzle using high frequency daily data from 31 countries including both developed and emerging economies during 1990 to 2013. The study provides evidence covers 9 different time horizons of forward exchange rates. We show that the predictive power of forward rates decreases in longer time horizons in a way that similar to the term structure of interest rate. The third study investigates whether financial liberalization plays a role in explaining the current crisis. Our sample consists of 12 developed countries for the period 2000 to 2013. Our results support that financial liberalization contributes to crisis, and suggest that reregulation is needed after deregulation.

This doctoral investigation considers the exploration of two theoretical concepts, namely Trust and Emotional Intelligence (EI) within Intercultural Service Encounters (ICSEs), taking into consideration customers΄ and employees΄ perception. The conducted systematic and narrative literature review on ICSEs provided the foundations for the development of an initial conceptual framework on affective trust during ICSEs. The researcher as a symbolic interactionist adopts a case study approach to explore the role of EI on the development of affective trust during ICSEs in the banking industry of Cyprus. Cyprus used to have an extremely sizeable financial and banking industry but the financial crisis has influenced adversely customers΄ trust towards the employees and the banking institutions. In order to gain a deeper understanding on ICSEs in Cyprus, the researcher adopts the critical incident technique (CIT) and conducts semi-structured interviews with frontline service employees (FSEs) and foreign customers within the banking industry. The collected data were analyzed via the template technique with the assistance of qualitative data analysis software NVivo 10. The research findings suggest that affective trust is very important for the financial services that aim to develop trust during ICSEs. The empirically validated conceptual framework reflects an in-depth exploration of the negative emotions that emerge during ICSEs and innovatively enables a holistic understanding on the role of EI in the development of affective trust in the banking industry of Cyprus. As a practical contribution, the researcher delineates a training agenda to local retail banking institutions, which includes strategies and specific emotion management tactics that directly address the development of affective trust during ICSEs.

Purpose- The aim of this research is to address the current gap in the disclosure literature by investigating risk disclosure in a developing economy (Saudi Arabia). The current study aims to widen the understanding of risk disclosure levels, determinants and economic consequences, by firstly examining the levels of risk disclosure in the annual reports of both Islamic and non-Islamic listed banks, secondly by empirically exploring corporate governance and the demographic traits of top management teams as the determinants of voluntary risk disclosure practices in and thirdly by investigating whether the levels of voluntary risk disclosure in Saudi listed banks are value-relevant or not. Design/Methodology/Approach- The sample consists of all banks listed on Tadawul. All data was collected from the annual reports of the sample banks from 2009 to 2013 using manual content analysis. Other variables were collected using DataStream and Bloomberg. This study develops two holistic risk disclosure indices to measure the levels of risk disclosure in both Islamic and non-Islamic banks. It also uses ordinary least squares regressions analysis to examine the effect of a combination of determinants stemming from corporate governance and demographic traits on risk disclosure. Ordinary least squares regressions analysis is also used in determining whether the levels of voluntary risk disclosure in Saudi listed banks are value-relevant or not. Results- The first empirical analysis shows that Islamic banks report less risk information than non-Islamic banks. However, the analysis also reveals that both Islamic and non-Islamic banks report relatively the same amount of risk information regarding the banks’ non-Islamic risk-related items. The second empirical analysis shows that Islamic banks report very low levels concerning Islamic risk-related items. It also shows that external ownership, audit committee meetings, gender diversity, education levels and profitability are primary determinants of risk disclosure practices in Saudi listed banks. Thirdly findings also exhibit that there is no association between the levels of voluntary risk disclosure and firm value as measured by the market to book value (MTBV). But, the results generated from the accounting based measure (ROA) show that there is a positively significant association between the levels of voluntary risk disclosure and firm value. Potential Contributions- This study contributes to the literature on general accounting disclosure and in particular advances and contributes to the literature on risk disclosure in developing economies. It also contributes to the understanding of the role of accounting information in relation to the levels, determinants and market valuation of a firm. Specifically, this study is significant in that it sheds light on the voluntary risk-disclosing practices of banks that operate in an environment that is often considered to be opaque. This investigation makes major contributions to the literature and increases the knowledge on risk disclosure and reporting practices in the annual reports of all listed Saudi banks, namely Islamic and non-Islamic banks. It makes a healthy contribution to the discussion on the levels, determinants, economic consequences and risk disclosure in banks annual reports. To the best of the researchers’ knowledge, no prior research has been conducted on the levels or the determinants voluntary of risk disclosure in Saudi Arabia. Also no prior research has been conducted on the relationship between firm value and levels of risk disclosure in general or in emerging markets. Therefore, this is the first study to investigate the levels, determinants and economic consequences of risk disclosure in this context. This study has also pioneered a novel contribution to the field of disclosure by incorporating the upper echelons theory into investigating disclosure. Particularly in this study this theory is extended into exploring the determinants of voluntary risk disclosure. Implications- The reported results should be useful to accounting and regulatory bodies by providing information about the inadequacies of risk reporting in Saudi banking sector. Regulatory institutions should be above all concerned about the disclosure needs of users. Therefore, SAMA, SOCOPA and CMA are called upon to find solutions to improve the reporting of risk information in the Saudi banking industry. The study also provides information for managers to keep investors satisfied about the risk that their banks encounter. Investors may use the findings for understanding risk disclosure behaviour of listed banks. It also informs regulators and investors about the importance and current levels of risk disclosure in all Saudi listed banks as well as informing them of the influence voluntary risk disclosure has on the value of the firm. It also calls upon managers who prefer to withhold from offering information to shareholder to be more transparent if they prefer to increase their banks market value and entice more investment. This can be used to increase the value relevance in the banking sector.

German guarantee banks provide guarantees for small and medium-sized enterprises (SMEs) that apply for bank loans but cannot provide their own valuable collateral; this lack of collateral would normally lead to credit restrictions. Consequently, the central aim of guarantee banks is to enable SMEs to be eligible for loans. In Germany, the state provides counter-guarantees in the range of 65-80 per cent of the guarantee bank's guarantee. To justify the governmental intervention and the risk-taking of the state, guarantee banks need to be evaluated regularly. The literature review has revealed that additional research about German guarantee banks is needed. Some interesting literature exists about the ability of guarantee schemes to alter the lending behaviour of banks and reduce information asymmetries between the lenders and the borrowers. However, the literature review has demonstrated that these mechanisms have not yet been tested empirically. The present research provided a unique research approach for bridging this gap. Following the conceptual literature, the research aim was to test the ability of German guarantee banks to compensate collateral shortfalls and make available loans to SMEs, reduce information asymmetries, create lending relationships and mitigate credit restrictions immediately as well as in a sustainable way. This was done by carrying out a web survey with firms that have received a guarantee from guarantee bank Hesse as well as conducting semi-structured research interviews with bank managers. The results have demonstrated that the provision of a guarantee from a guarantee bank provides the missing collateral to banks and makes available loans to otherwise credit restricted SMEs. Evidence has been found for a reduction of information asymmetries and a creation of lending relationships between the borrower and the lending bank. Moreover, connections between an application for a guarantee and the support of the region and cross-selling aspects of commercial banks have been revealed.

This thesis investigates two main aspects related to the use of credit default swaps (CDS) by European banks. The first area of investigation focuses on the relationship between the CEOs' risk-taking incentives generated by stock option compensation and the usage of CDS by banks. This thesis contributes to the existing literature in risk management with derivatives, which initially assumes that the use of derivatives is intended to reduce firm risk, by distinguishing between CDS use for hedging purposes and CDS use for trading purposes. The relationship between CEOs' risk-taking incentives and CDS use in banks, and the influence of CDS use on bank's risk are investigated based on the purpose of CDS use. This thesis utilises the estimates of the Black-Scholes sensitivity of executives' stock option portfolios to stock return volatility (vega) to test the relationship between CEOs' risk-taking incentives and CDS use. In addition, this thesis distinguishes between the effect of risk-taking incentives on CDS use for hedging purposes, and the effect of risk-taking incentives on CDS use for trading (speculating) purposes. The second key aspect of this thesis is to examine the effect of CDS use on bank risk by distinguishing between the effect of CDS use for hedging purposes and CDS use for trading purposes. The purpose of CDS use that depends upon the managers' risk-taking incentives and the use of CDS can have different implications to the risk profile of the bank. Data for the period of 2006 – 2011 were hand collected from the annual reports of sixty European banks. The sample comprises publicly listed banks from European stock market indices and premier indices of the European Union countries (EU-27). In conducting the empirical testing, the two stages regression approach was used to adjust for the potential endogeneity that could arise between the risk-taking incentives of stock option compensation (vega), and CDS use. The results show a significantly positive relationship between CEOs' risk-taking incentives generated by stock option compensations and CDS use in banks for trading purposes. This implies that higher risk-taking incentives (vega) are associated with greater CDS use for trading purposes. Furthermore, there is a negative linkage between CEOs' risk-taking incentives and CDS use for hedging purposes at weak levels of statistical significance. The results also show strong evidence of a positive linkage between CDS use for trading purposes and bank risk. CDS use for trading purposes is associated with a higher bank's beta and lower distance to default. Further, the results show a positive and significant relationship between CDS use for hedging purposes and bank risk. CDS use for hedging purposes is also associated with a higher beta of a bank and lower distance to default. These results are consistent with the theoretical predictions of Smith and Stulz (1985), who suggest that stock options can influence managers' decisions to use derivatives and lead to greater alignment between the interests of managers and shareholders by mitigating managerial risk aversion. Thus, stock options provide managers with incentives to take on risk. Overall, the evidence presented in this thesis suggests that CEOs' risk-taking incentives derived from stock options compensation is a key determinant of CDS use in banks. Moreover, banks' CDS use increases bank risk regardless of the purpose of its use. Both hedging and speculating CDS activities are associated with a bank's higher risk. This thesis provides an integrated understanding and builds a comprehensive picture of how CEOs' stock option compensation can affect the purpose of CDS use, and how this use influences bank risk. It primarily extends previous empirical literature, which initially looked at derivatives as a risk reduction instrument, by distinguishing between CDS use for hedging purposes from CDS use for trading purposes.

Credit risk is one of the most general risks that exist in the financial market and a major risk faced by financial institutions. Credit risk management (CRM) is to identify, measure, monitor, and control risk arising from the possibility of default in loan repayments. The primary objective of CRM of rural commercial banks (RCBs) is to maintain risk within acceptable parameters and satisfy the regulatory requirements. CRM has long been the focus of governments, regulatory authorities and financial institutions. This thesis examines the importance of CRM for RCBs, which has been overlooked in the literature, and attempts to develop a CRM framework for RCBs. It has four specific research objectives: 1) to discuss the differences between RCBs and city based-commercial banks; 2) to examine the importance of CRM for RCBs and identify the approaches available for banks to manage credit risks; 3) to identify the key factors that have influenced the credit evaluation and assessment, as well as credit risk control in the context of China's RCBs; and 4) to propose a practicable CRM framework that suits the characteristics of Chinese RCBs. This study adopts qualitative analysis and case study approaches to identify key factors contributing to the failure of RCBs' customers, resulting in loan defaults and banks' credit risk. The quantitative-based CRM tools available for large financial institutions do not meet the requirements of RCBs because the main customers of RCBs are small and medium-sized enterprises (SMEs) and farming households and there is a lack of financial data and credit rating relating to these customers. In addition to normal risks faced by financial institutions, RCBs in China are also exposed to risks specifically to rural commercial banking business and in particular, farming-related loans and services. This study proposes a CRM framework for RCBs in China. The framework is based on the identification of business failures of RCBs' customers and factors contributing to the failures of SMEs and farming households. The framework is divided into five steps. The first step is to distinguish business failure and closure. The second step is to identify factors contributing to the failure of customers, which should be considered from environmental, operational, financial and guanxi aspects. The third step is to use PCA to identify principal factors. The fourth step is to design a credit risk analysis model with an analysis of these principal factors. The final step is to use the credit risk analysis model to manage credit risks of their portfolios and individual loans provided to SMEs and farming households. The CRM framework has been confirmed by practitioners through interviews conducted in the case bank. Interviews raise a number of issues relating to the development of a CRM model and assessment of credit risk of SMEs in China. The case study through an analysis of documents of the case bank reveals the importance of CRM and organisational structure in risk management and CRM. The case study presents evidence of lacking of practical methods in managing credit risk by RCBs in China. The proposed framework expects to address the problem. This study has made several contributions to the literature that studies CRM in financial institutions in general and RCBs in particular. This study critically identifies the current lack of studies specifically addressing the RCBs' CRM, and proposes a CRM framework for RCBs. The framework considers financial and non-financial variables to analyse SMEs and farming household for which financial information is very limited. Using nonfinancial variables along with financial variables as predictors of business failure significantly improves credit analysis quality and accuracy. Also, this study recognises guanxi as risk potentials affecting the business of SMEs and farming households and includes guanxi risks in the framework. The consideration of guanxi in credit risk analysis fits well with China's business environment.

This study investigated training and development in Libyan public commercial banks in relation to improving policies and practices to improve skills and performance. It assesses and evaluates training and development from the views of managers and staff. The study considers how organisational culture influences the assessment of staff and their needs and assesses the relationship between gender, experience, qualifications and staff training choices for training. The study has investigated the problems that trainees and trainers encounter in training and how they could be avoided. The attitudes of three managerial levels, top managers, HRM managers and training and development managers were obtained via 351 survey questionnaires and 12 interviews with three levels of bank managers. No systematic training needs assessment was undertaken professionally at the banks investigated. The specialised training that staff get sometimes takes place abroad and is influenced by foreign banks and financial institutions whose operating methods can conflict with Libyan banks and culture. Training material is mostly in the form of lectures, discussions, seminars and other traditional methods of training. Training improves job satisfaction, reduces absenteeism and contributes to a sense of workplace belonging. Nevertheless, this study has found that culture plays a significant role in training and the selection of staff for training, particularly for women. Other influential factors affecting HRD strategies are management style, cultural norms and religion. This is one of the first studies to attempt to understand the nature of strategic training and development activities in Libyan commercial banks. It identifies the concerns and problems related to the training strategies adopted in order to improve organizational performance. Additionally, the study identifies and proposes factors that will improve staff training, as well as methods of training assessment and evaluation that are required in the context of a business sector that is essential for economic development.

The overall purpose of this thesis is to examine the models for effective compliance, and those currently adopted in practice within the financial service sector. The need for financial service organisations to maintain a robust compliance function has developed due to ever increasing regulatory demands following the most recent global financial crisis, alongside concerns over compliance culture within financial service organisations. An overarching research question exists of why the compliance function is often viewed as business inhibiting within practice. This research engaged with practitioners with experience of working in financial service organisations and regulatory bodies. Repertory grid interviews (a technique stemming from Personal Construct Theory) explored practitioners’ personal worldviews of what comprises effective compliance via consideration of experiences ranging from ‘worst’ to ‘aspirational’ compliance. Practitioners do not align perceptions of benefits and costs of compliance in a linear fashion, when comparing worst and aspirational compliance experiences, which challenges the traditional models presented within academic literature. Barriers to regulatory compliance were highlighted, when exploring personal constructs with recurring themes of culture (management buy in) and also judgement (spirit, as opposed to, letter of the law). Compliance officer are highly aware of the importance of relationships with the regulator, and remain proactive in prioritising workload around the regulatory approach. An alternative model for compliance is presented in the form of the ‘Compliance Trust’. The model results in a compliance community which would operate independently from the financial service firms that they serve, and differs from traditional commercial consultancy or outsourcing with the emphasis on societal contribution and integrity, rather than economic motivations. The compliance trust would benefit organisations, via rotation of experience and knowledge sharing. This research provokes reflection on current practice in comparison to existing academic theories, and seeks to identify whether alternative models are viable for the future of compliance approaches within financial service practice.