Liquidity is one of the most intensively topics researched in financial economics for the last decade. Against this backdrop, this thesis attempts to address issue of liquidity in derivative markets and derivative models. It begins with the provision of empirical evidence that liquidity risk can serve as an additional risk factor to market risk factor in pricing the commodity futures and it also outlines the vital role played by liquidity in futures prices of commodity co-movement and co-integration. Empirical evidence yields strong support on futures pricing model building, where factors should include both market risk and liquidity risk. On above basis, this thesis builds two-factor futures pricing model by taking liquidity risk into account. I have also used 20-year oil futures market data to empirically justify liquidity-adjusted futures pricing model compared with traditional future pricing model without liquidity factor. I utilize mean pricing error (MPE) and root mean squared error (RMSE) to estimate errors for both models and I also adopt T-test for statistical significance justifications. For most years, liquidity adjusted futures pricing model performs better than the traditional model with results being statistically significant. More importantly, liquidity adjusted futures pricing model can predict spot prices and futures prices simultaneously, which means only one model can be applied in both spot price predictions and futures price predictions based purely on historical market information. Existing models either predict futures prices by using spot prices (e.g. Black, 1976) or use futures prices to predict spot prices (e.g. Reichsfeld and Roache, 2011). As a result, my model has a great degree of prediction power with its prediction errors being less than 3\%, which is relatively small. Therefore, it is arguable, that liquidity risk plays a key role in commodity futures markets and illiquidity of those assets could prove influential on firms' daily operations. I also build an intrinsic nexus between real options theory and real asset illiquidity to accommodate this issue. Study of the new real options model reveals effects of real asset illiquidity towards investment threshold and flexibility values, namely, exercise boundary and real options values, which is complementary to existing real options and corporate finance literatures. Instead of constructing free boundary line, which shows effects of time and asset price, the model presents a three-dimensional ‘free surface’, which indicates not only effects of time and asset price, but also that of asset illiquidity. The new model contributes to two types of existing literatures. The first type focuses on effects of real asset illiquidity (mainly physical asset) on corporate investment and cost of capital. Illiquidity of existing physical assets will decrease corporate investment and increase cost of capital (Gan, 2007; Flor and Hirth, 2013, and Ortiz-Molina and Phillips, 2014). In addition to physical asset illiquidity, I distinguish physical asset from (expected) inventory asset within real asset category. The new model shows that the inventory asset illiquidity would also shape the corporate investment behaviors. Additionally, the model also relates to literatures that document investment booming during unfavourable market conditions. I argue real asset illiquidity could engender the suboptimal exercise of real options. Simulation results of the new model illustrate that investment threshold becomes lower as waiting value and flexibility get eroded by asset illiquidity. Because of lower exercising boundaries, firms have higher a probability to exercise real options, but at lower values, which results in suboptimal exercise of real options. The suboptimal exercise of the real options due to the asset illiquidity might provide an interpretation for the investment booming during unfavourable market conditions. More importantly, I argue that the suboptimal exercise of real options might undermine firm value and thus firms shall be more prudent to invest when the environment is unfriendly.

This Thesis is a both timely and warranted examination of ‘risk management behaviour’ in Greek banking inter-linking cost efficiencies with loan loss provisioning practices during 2005 to 2012. Firstly, utilising Stochastic Frontier Analysis, we construct numerous cost efficiency frontiers and examine the evolution of cost efficiency in the banking system. Secondly, we investigate the risk management behaviour and the dominant loan loss provisioning practises in the domestic banking sector. These include capital management, efficiency hypotheses and the cyclicality of loan loss provisioning. Finally, we investigate the evolution of non-performing loans and if they are Granger caused by bad management or cost skimping within our construct of risk management behaviour. During 2005 to 2012 the ‘four core’ banks record strong performances and operate at higher levels of cost efficiency than their domestic competitors. This gap was reduced after the 2008 and 2010 financial crises, thus indicating an adverse impact due to the Private Sector Involvement. Overall, despite the so called bond haircut, the Greek banking system still recorded a strong performance where many banks operated close to the optimal efficiency levels, despite the ongoing deepening economic recession. In addition risk bank management behaviour presents loan loss provisioning practices that are counter cyclical to the Greek business cycle. These results suggest that banks have engaged in capital adjustment via their loan loss provisioning resources. In addition, we present evidence to support that low cost efficient banks reported higher levels of loan loss provisioning indicating difficulties in raising additional external capital. Finally, with respect to the development of non-performing loans we present evidence of cost skimping and little support concerning moral hazard in Greek bank risk management behaviour.

This dissertation aims to design and implement a tailored performance management framework for Chinese commercial banks in order to deal with some of the bank problems. Chinese commercial banks are experiencing rapid development from both internal management and external environments. With increasingly fierce competition, more strict risk management requirements and ongoing reform of process-oriented bank, many issues emerged regarding to the banks management and operations. Performance management is believed to be an effective tool to deal with some of the bank problems. However, the current performance management frameworks used in Chinese commercial banks are mostly designed for general organizations. There is lack of a systematic performance management framework specially designed for Chinese commercial banks considering features of banking operations and their current situations. Thus in this study, the main features of Chinese commercial banks are firstly discussed, which include risk management and external supervisory institutions. Then a performance management review is carried out including key definitions and current developments of performance management theories as well as some performance management methods. The commonly applied six steps performance management framework is adopted in this research since it is consistent with the research purpose. After that, the current performance management studies and practices in Chinese commercial banks are reviewed and discussed. Meanwhile, recent studies show that suitable performance management models are closely related to organizational structure. Therefore a review of organizational structure theories, especially the Minzberg's configuration theory, is carried out. The configuration theory suggests applying different management approaches for different parts of an organization, which assists to identify different structures in Chinese commercial banks and then design proper performance management activities. Based on the above review, a performance management framework for Chinese commercial bank is developed. This framework initially follows the six steps framework and integrates the bank features in management and operations into the performance management activities. The configuration theory is also applied in this framework in order to identify performance management targets as well as design proper performance management approaches. The main contingency factors related to this framework are discussed, especially the factor of stable organizational structure, since a rapid changing organizational structure requires further adjustments of the framework. This framework is applied in a case study which is carried out in a Chinese commercial bank located in Henan province. A performance management system is designed and implemented according to the framework based on the banks current situation. Feedback is collected after the implementation, and generally is positive. The framework is then adjusted by introducing performance tree method in order to deal with rapidly changing organizational structure. Compared with other methods, Performance tree method does not rely on the current organizational structure (e.g. Department structure) to carry out the strategy decomposition and deployment. It is also powerful in looking for innovative improvements in operations. The adjusted framework is applied in another case study carried out in a commercial bank located in Zhejiang province. This bank is experiencing rapid change in both management and operations due to process-oriented banking reform. Traditional performance management approach is found failed to deal with their current situation. A performance management system is designed for this bank based on the adjusted framework. Moreover, we also assist to develop a digital mission monitoring system to track and carry out their daily performance management activities. The feedback is positive after the implementation, and the bank is praised for good progress in building of process-oriented bank. The main contribution of this dissertation is the design and implementation of the tailored performance management framework for Chinese commercial banks, especially the adjustments in framework by introducing the performance tree method. It enriches theories and practices of performance management system in a rapid changing organizational structure. Further studies are suggested to look for more applications of performance tree method in different type of organizations.

The study compares the efficiency of Islamic and conventional banks, during the period 2006-2012, by employing a non-parametric approach- the Data Envelopment Analysis (DEA). In order to minimise the bias resulting from the inherent dependency in the first stage of the DEA, the DEA outcomes were replaced with the bootstrapped estimators and replicated them 500 times. Accordingly, confidence intervals are constructed for efficiency measures, which subsequently, improved further the accuracy of the findings and provided more reliable arguments for policy implications. The study applies a two-stage Data Envelopment Analysis. The first stage of the DEA compares banks based on their Overall Technical Efficiency (OTE) and its components (Pure Technical Efficiency (PTE) and Scale Efficiency (SE)). Although proven to be more resilient during the financial crisis (Farooq and Zaheer, 2015), the research found that Islamic banks to be normally on a par with their conventional counterparts in terms of PTE and that they were significantly higher in terms of OTE and SE . In addition, according to the study’s results, both Islamic and conventional banks suffered from managerial underperformance rather than a failure in operating at optimal production levels. In other words, Islamic and conventional banks were managerially inefficient in controlling their operating costs and utilising their resources. The second stage of the DEA, which accounts for the country- and bank- specific factors, confirms the findings that there was no significant difference in PTE between Islamic and conventional banks. Moreover, the findings imply that Islamic banks have no significance on pooled PTE and show no significant difference in PTE when compared to conventional banks during the entire period of the study including the financial crisis (2007-2009). In the light of the study’s empirical findings, Islamic banks should explore the benefits of moving to more diversified investments and tools in order to make use of their liquidity. Moreover, Islamic banks have to employ more solid risk management techniques in order to limit the number of risks, including credit risk, market risk, liquidity risk and operational risk, which may arise in the shari’ah banking industry. The research is extended to study the PTE determinants of four regions, namely, MENA, East Asia and Pacific, South Asia, and Europe and Central Asia. The outcomes show that PTE had a different significance for each region’s determinants related mainly to the levels of the indicators of governance, namely, Voice Accountability (VACC) and Regulation Quality (REGQ). The findings suggested that the more developed and democratic countries were favourable to banks having more operations that are efficient. In addition, these countries’ excessive regulation and supervision (i.e. limited financial freedom), encouraged financial institutions to create unclear new instruments and misjudge the risks. These resulted in the banks being less efficient. The study found, also, that there were different determinants for Islamic and conventional banks operating in Muslim and non-Muslim countries.

The 2008 global financial crisis has been estimated to have resulted in losses of $4.3 trillion dollars to global banking institutions (Castells et al. 2012). The crisis placed the spotlight on banking culture (Moore 2012, 2013; Peston; 2013; Smith 2012; Salz 2013 Spicer et al. 2014; Deloitte 2013; CIPD 2013;) with claims that the causes of the crisis transpired from the ‘very heart of its [banking industry’s] culture’ (FT.com 2014). In the aftermath banks have attempted to introduce cultural change programs to encourage the right behaviours and conduct in an attempt to reduce wrongdoing and misbehaviour. This thesis critically explores mainstream perspectives of organisational culture (Peter and Waterman 1982; Deal and Kennedy 1982) in the context of the banking industry. Mainstream perspectives on culture were encapsulated by the idea that culture can be shaped and modified by management to produce a ‘strong culture’, which would in turn increase commitment, productivity and profitability (Wiener 1988; Parker 2000; Kilmann 1985; Du Gay 1996). Thirty years on since cultural engineering’s initial introduction, practitioners and industry ‘experts’ continue to buy into the virtues of strong culture management, portraying it as a panacea to the banking industry’s problems (PwC 2016; Salz 2013; CIPD 2013). Therefore, this thesis aims to revisit the topic of organisational culture in order to look at how the banking industry has approached culture management post-crisis. This thesis will draw on Foucault’s work on power, discipline and discourse (1977; 1978; 1980) to provide a framework that allows for an exploration into the complexity and ambiguity of culture, arguing that organisational culture is mutually constructed through contesting power relations and the interactions of organisational members. In order to interpret and analyse the empirical data, this thesis developed the concept of performance discourse. This thesis argues that performance discourse influences conduct and behaviour at a taken for granted routine level. It is predicated on competition, financialization of the individual, internalising responsibility and the intensification of work and elitism. Performance discourse goes beyond the dualism that views culture as either a thing or as a metaphor discussed in previous studies. In so doing, it helps us to make sense of why the idea that culture is still a ‘thing’ and a tool for managerial manipulation still dominates industry perceptions, fuelling the continuing, widespread belief that culture is installed top-down.

This thesis provides a comparative analysis of how the power of the United States Federal Reserve, the Bank of England and the European Central Bank has changed as a consequence of the reorientation of central banking towards financial stability since the global financial crisis. Drawing on a wide range of primary and secondary sources, including more than 30 interviews with central bankers and other public officials, the thesis demonstrates that to different extents, each of these organisations has exhibited a more authoritative relationship with its key interlocutors in recent years. The thesis attributes this variegated transformation to the policy entrepreneurship of transgovernmentally networked central bankers, who acted in concert with sympathetic executive politicians to operationalise new ‘macroprudential’ policy frameworks after the financial crisis. Central bankers’ collective policy entrepreneurship was guided by shared normative beliefs about their appropriate role in respect of financial stability, but their embrace of macroprudential ideas was far from uniform. Central bankers in each jurisdiction pursued subtly different policy objectives within idiosyncratic political, cultural and institutional terrains, leading to distinctive local varieties of reform. The thesis argues that central banks’ heightened authority since the financial crisis has been underpinned by an increase in their structural power, which owed to the heightened reliance of politicians and financial market actors on central banks’ unique ability to create new base money. It also demonstrates how transformations in central banks’ authority and structural power feed into their overall capacity to achieve their financial stability objectives. The thesis argues that in the post-crisis regulatory framework, central banks are at risk of underdelivering on their mandates. A bias towards inaction in the face of uncertainty and insufficient willingness to break with pre-crisis economic tropes threaten to undermine central banks’ efforts to maintain financial stability over the medium term.

With the Internet revolutionising the banking industry, customers nowadays expect much more from their banks, demanding more convenient, flexible, and easy-to-use financial products and services that could not be easily offered by traditional retail banking. Consequently, several new banking applications have emerged in order to cope with this demand, Internet banking (IB), as an example of these applications, is considered to revolutionise the traditional way of thinking about banking services. Despite the potential benefits offered, Jordanian bank customers are reluctant to adopt IB services. In response to this issue, this study aims to enhance the general understanding concerning the factors that affect customers’ adoption of IB in a developing country of the Middle East, namely Jordan, where the results can be also applied to other developing countries in general. The main objective of this research was to investigate factors influencing the adoption of IB services by Jordanians. Two technology acceptance models, namely the Diffusion of Innovations Theory (DIT) developed by Rogers (1983), and the Technology Acceptance Model (TAM) developed by Davis (1989), were integrated with external variables in order to synthesize a new exploratory model; the synthesized model was then tested empirically for its predictive power. Two data collection phases were utilised: (1) quantitative data was collected in the first phase to test the research model and confirm related hypotheses using a survey questionnaire (463 respondents); and (2) qualitative data was gathered in the second phase via a semi-structured interview exercise (six participants). This phase was incorporated in order to explore bank customers’ perceptions of IB influencing factors identified in the first phase, and to provide further confirmation for the research model and hypotheses. Results showed that eight factors directly determine customer intentions to adopt IB services. Those factors are: perceived usefulness, perceived ease of use, trialability, compatibility, observability-result demonstrability, innovativeness, government support, and information about Internet banking. Accessibility and perceived financial cost were found not to be direct predictors of intention; however, the latter has emerged to affect intention indirectly through perceived ease of use. While results indicated that personal innovativeness was found to be the most influential predictor of intention to use IB, both directly and indirectly through perceived usefulness and perceived ease of use, perceived financial cost was the least influential factor to affect intention since it only exhibited indirect influence through perceived ease of use. Gender, age, education, occupation, and income, all proved to be influential in determining customers’ intentions to use IB services. Moreover, results revealed that users of IB were significantly different from non-users in terms of their attitudes relating to all investigated variables. Overall, the results of the current study showed that the proposed model has a good explanatory power and is therefore robust in predicting customers’ intentions to adopt IB in the Middle East and in other developing countries in general. This research contributes to the identification theory and practice of technology acceptance for Internet banking in five ways. Filling the gap in IB adoption literature in developing countries through examining the factors that might impede or encourage the adoption of these services among customers; developing and validating an integrated technology acceptance with a good explanatory power in predicting and explaining the potential users’ behavioural intentions towards technology adoption in non-Western contexts; developing a valid and reliable instrument to measure individuals’ intentions to use IT innovations; providing valuable insights into how to enhance customers’ acceptance of IB services in a developing country context by indicating the relative importance of the identified influencing factors and providing a set of specific strategies in a form of practical recommendations designed to overcome the low adoption rate of IB in developing countries.

Islamic finance has extended the debates on corporate governance beyond the traditional stockholder-stakeholder models to a Sharī'ah governance (SG) perspectives. Sharī'ah governance issues dominate the agenda of Sharī'ah compliance in institutions offering Islamic financial services. These institutions profess to apply principles and precepts of the Sharī'ah to ensure equitable satisfaction of stakeholder interest in their products and services, beyond maximisation of shareholder value. As subset of the opaque industry of banking and finance, Islamic banks and financial institutions shroud their SG practices in secrecy. Extant academic research on SG has mainly applied surveys using traditional deductive models of explanation, based on statistical generalizations, to examine the state of SG practices and the disclosure of Sharī'ah committee reports and Sharī'ah concepts in annual reports and websites. There is a dearth of literature on the Sharī'ah governance process itself. Meanwhile, various governments and jurisdictions have approached the issue of SG in diverse ways, ranging from lukewarm attitudes SG to regulatory-based SG. To date, countries are classified in terms of their approach to SG from regulatory perspectives into five: a 'passive approach', a 'minimalist approach', a 'reactive approach', an 'interventionist approach' and a 'proactive approach'. Malaysia applies the proactive approach to SG, where the regulator institutes a comprehensive SG framework to strengthen Sharī'ah compliance in Islamic financial Institutions (IFIs). The common law country also operates a dual banking system - conventional and Islamic. And it is considered to have the most advanced and conducive legislative and infrastructural environment for Islamic finance globally. This thesis attempts to contribute to our understanding of SG within the broader framework of corporate governance in IFIs. The thesis explores the relationship between corporate and Sharī'ah governance and product operations of a bank in Malaysia that adopts a unique approach to providing Islamic and conventional banking products and services concurrently, known as the Dual Banking Leveraged Model (DBLM). With this model, the Islamic franchise leverages on the infrastructure and human resources of the holding company to operate an Islamic banking business. Given the dearth of literature on this model, the study draws on Scapens' (1990) version of holistic case study and Dubois and Gadde's (2002) 'Systematic combining: an abductive approach to case study research', to conduct an in-depth case study using multiple sources: observation, information from websites, annual reports, financial statements, and primary data via interviews with different stakeholders of the bank (the board, Sharī'ah committee, management and staff) to gather evidence on the application of corporate and Sharī'ah governance in the operations of CIMB Islamic.

The UK Government encourages citizens to help themselves through policy initiatives such as the ‘Big Society’. This study provides an empirical snapshot of different aspects of modern society that contributes to existing literature on social participation, social exclusion and collective action. This study uses novel interview survey data from a representative sample of 1,005 households in the UK coastal city of Portsmouth. Particular aspects of society that this study investigates includes; understanding the determinants of social engagement; through citizen’s willingness to volunteer and the intensity of their voluntary efforts. In this study, willingness to volunteer includes giving unpaid help to groups, clubs or organisations, or voluntarily participating in local decision-making groups, for example, a group making decisions on crime in the city. To contrast civic engagement, this study addresses issues of social exclusion with a focus on digital exclusion and financial exclusion. In this study, digital exclusion refers to those individuals who do not use the internet either at home, work, place of study or elsewhere. Indicators of household financial exclusion include credit refusal or the use of ‘doorstep lenders’ while indicators of financial self-exclusion include the absence of a savings account or home contents insurance. Additionally, this study examines the determinants of citizens’ concerns and perceptions of helplessness in face of the societal threat posed by climate change and flooding in Portsmouth, a city at risk of inundation from rising sea levels and the city has recent experience of flooding. A simple local and global public good framework is used to organise the understanding of reported attitudes and their determinants. As such, this high resolution data from one UK city provides an indication of the nature of society in modern Britain. Multivariate statistical analysis is used in identifying the attributes of individuals who are willing or actively involved in society, who are concerned or express perceptions of helplessness in the face of environmental threats, and also draws on the attributes of those who experience exclusion from society for whatever reason. The City of Portsmouth context provides a unique backdrop to understanding each of these issues. The main findings from the study shows that some of the most vulnerable people in society are less likely to choose to participate in local community activities, but rather they are more likely to experience social exclusion. Indeed, even within the confines of a densely populated city such as Portsmouth, locality matters, even after controlling for a range of socio-economic and demographic variables.

This thesis is divided into eight main chapters and makes contributions to the area of financial crises and international finance. The first chapter provides a general introduction to the thesis and highlights the main contributions of our work. The second chapter is a literature review which provides a well-defined structure to organise our thoughts about the literature on micro-systemic risks and Central Bank policy. The chapter initially reviews the literature for single-bank crises. It then proceeds on to provide a succinct account of multiple-bank crises and of financial crises that result from the interaction between banks and financial markets. The main value-added of this chapter is that it helps us identify those areas in the literature in which research work is missing. This provides legitimate foundation for building new models to address these issues. The subsequent chapters of this thesis have emerged to bridge these missing gaps identified in our literature review. Chapters 3, 4 and 5 deal with banking panic transmission in two-bank scenario. With common investments affected by the same macroeconomic fundamental, a crisis that spreads from one bank to another has contagious and correlated elements. The purpose of these chapters is to provide a robust theoretical account that can enable us distinguish between these two elements in probability terms. We embed a two-bank model within a dynamic Bayesian setting and use the global games approach to derive the existence of trigger equilibrium in each bank. Chapter 3 provides an overview of our banking environment. Chapter 4 makes a contribution to derivation of the equilibrium concept and shows the equivalence between Perfect Bayesian Equilibrium (PBE) of our game and trigger equilibrium. Chapter 5 encapsulates all results. We show the existence of contagion as one of `excess correlation' between banks. This allows us to depart from existing theoretical papers which explain contagion as interdependence. Furthermore, we show that whether contagion or correlation occurs is a function of the relative importance depositors attach to private vs public signals. The chapter ends by identifying some puzzles (zero-link, clustering and avoidance) which our paradigm can explain and throws light on ways (which are not captured by single-bank models) Central Banks should implement prudential policy measures. Chapters 6, 7 and 8 deal with financial crises in open economies. An important limit of existing bank run models is that they are developed without taking into account the level of economic development of the economy in which they occur. We are interested in studying how financial crises occur in an Emerging Market Economy (EME) and, most importantly, how the nature of their occurrence differs when the exogenous macroeconomic constraints of an EME are duly accounted for. Chapter 6 introduces the main banking environment we study in the subsequent two chapters. Important among the assumptions are that all depositors in the banking system are foreign investors (the economy is fully liberalised) and that banks have balance sheets characterised by liability dollarisation. We use the mechanism design approach to show the existence of a pecking order in allocation of resources and liquidity. In particular, we show that a banking allocation is weakly Pareto- inferior to that of a Planner who observes all structures of the economy but its stochastic fundamentals and who achieves second-best allocation. Once this banking allocation is derived, Chapter 7 studies the nature of the transmission mechanism from a banking crisis to a currency crisis. We show that under certain parametric restrictions, Lender-of-Last Resort (LOLR) policies may be a conduit that generates a currency crisis. In a multi-bank setting, LOLR may even be sub-optimal since it may induce devaluation-based bank runs at other banks. Chapter 8 studies the reverse causation from a currency crisis to a banking crisis. Both chapters 7 and 8 offer useful guidance to policy. The success of a policy measure depends on its ability to restore the Planner's second-best. A number of policy options (e.g state-contingent controls) are studied and suggestions for design of exchange rate regimes, based on ability to ward off the twin crises, are offered as well.