This research aims to explore and investigate the interrelationship between performance measures and determinants of Sudanese Islamic banks. To generate a comprehensive picture of such interrelationship, three models are built. To achieve the study objectives a secondary source of information presented in the annual reports of twenty-seven Sudanese Islamic Banks, covering the period 2005-2013, was utilised. Empirical evidence from the first model indicates that the management of Sudanese Islamic Banks lacks the capability to predict and avoid the risk associated with leverage. With regards the profitability determinants, in relation to the Islamic banking industry, the model prove that PLS (Modarabah and Mosharakah) have a significant positive impact on profitability. This is due to the policy of the Central Bank of Sudan which encourage banks to use Mosharakah mode for financing all economic activities as well as giving each bank the right to determine the Modarabah’s percentage share in the profits. Evidence from the second model shows that the presence of women in departmental managers’ positions has significantly negative impact on the profitability of banks. This due the restricted role of women in the Islamic culture which lead women to have career development barrier. Meanwhile, due to coordination and communication problems resulting from enlarging the board size and higher cost of directors’ salaries and remunerations, the impact of the size of the board of director on the profitability of Sudanese banks is proved to be negative and significant. Findings from the third model suggest that females’ departmental managers at Sudanese banks have a risk aversion attitude which leads to more performance stability of these banks. Finally, the model proves that the proportion of Ph.D. holders in corporate governance positions enhance the managers’ understanding of decision making and risk taking techniques.

This thesis examines the effects of micro- and macroprudential regulations on banks conduct and the real economy. We begin with an analysis of regulatory enforcement actions’ effect on regional economic growth in the U.S. Next, we evaluate changes in bank conduct resulting from the implementation of state depositor preference law. Finally, we focus on macroprudential regulation and their effect on multinational banks’ cross-border lending. Throughout this thesis we employ quasi-experimental estimation techniques to establish our results. In the first chapter, we account for the non-random assignment of regulatory enforcement actions by employing instrumental variables regressions that exploit exogenous changes in the intensity of regulatory monitoring. We show that sanctioning banks with Formal agreements, Prompt corrective actions or Cease and desist orders leads to economically significant yet only temporary reductions in personal income growth, the number of establishments, while simultaneously increasing the unemployment rate. We document that these real effects are driven by contraction in bank lending and liquidity creation which also follow the issue of severe enforcement actions. Using difference-in-difference estimations that exploit plausibly exogenous variation in the implementation of state depositor preference law in the U.S., we show that changing claims’ priority structure on failed banks’ assets triggers important changes in banks conduct. We document that conferring priority to bank deposits at the cost of non-deposits intensifies bank monitoring by general creditors. This result is reflected in higher costs of banks’ non-deposit funding. We are also able to demonstrate that banks respond to more intensive monitoring by adjusting conduct. Financial institutions subject to the new claims priority structure reduce their risk taking and improve their profitability. Finally, we document that foreign banks’ organizational structure plays an important role in cross-border transmission of macroprudential regulation. We document that lending provided by foreign banks branches in the UK is more sensitive (relative to subsidiaries) to tightening of capital requirements in the home markets of their parent banks. Difference-in-difference estimates reveal that on average foreign banks 2 operating under the branch structure reduce their lending to other financial institutions in the UK by 6% more compared to subsidiaries. We find no heterogeneity in banks’ response to lending standards and reserve requirements. This thesis presents two key policy implications. First, our results show that the introduction of the depositor preference laws should have beneficial effects on the banking industry. In case of enforcement actions and macroprudential regulation effects policy implications are not as clear cut as for depositor preference. While, we find adverse effects stemming from the use of enforcement actions and higher sensitivity of branch lending to macroprudential regulation these effects are short-lived and therefore may not necessarily offset the benefits resulting from exercising these regulation.

This thesis provides empirical evidence of the impact of financial liberalisation on the competitiveness and efficiency of the Vietnamese banking sector by applying a combination of non-parametric frontier estimation methods, stochastic frontier methods and Tobit panel data regression techniques. There have been few studies in Vietnam linking financial liberalisation to banking sector competitiveness and efficiency. In the thesis, these parametric and non-parametric methods are applied in a pilot study to measure the allocative efficiency at branch level of the Vietnam Bank for Agricultural and Rural Development (VBARD) – the largest bank in Vietnam in terms of total assets. The technical efficiency of the Vietnamese banking sector at bank level is then estimated using the same methods. The empirical investigation of the thesis is based on the use of branch-level data and bank-level data for a sample of more than 50 branches of VBARD across the country over the period 2004–2008 and around 40 banks over the period 2002–2012. Using data envelopment analysis (DEA) to measure allocative efficiency at branch level and technical efficiency at bank level and using stochastic frontier analysis (SFA) to estimate cost and profit efficiency at branch level, the thesis suggests that the contributions of financial liberalisation to bank efficiency are generally mixed, depending on the measures of bank efficiency used and the sub-periods taken into account. The thesis presents weak empirical evidence of the positive impacts of financial liberalisation on efficiency improvements of the Vietnamese banking sector at both branch and bank level. Banking efficiency is inconsistently increased over the period of financial liberalisation as the financial market is more liberated and the size of the banking sector substantially increased. Hence, industry rationalisation through reconsolidating and restructuring mergers and acquisitions (M&A) is required. The thesis suggests that both financial liberalisation and greater competition contribute to lower profit efficiency and higher costs for banks. The thesis indicates that the Vietnamese banking system is dominated by large banks and that the state-owned commercial banks (SOCBs) are more efficient than the joint stock commercial banks (JSCBs), mainly because of their competitive advantage in terms of size. Furthermore, Vietnamese banking efficiency at both branch and bank levels is significantly improved by high levels of capitalisation, larger size and a better labour force, while it is hampered by low loan quality. The findings also suggest that the northern banks in Vietnam are more efficient than the southern banks. The empirical evidence of the thesis is also focused on investigating the impact of financial liberalisation on bank technical efficiency and productivity growth, making use of a two-step approach consisting of DEA and Tobit panel data regressions. The analysis conducted across the different location groups (north and south) suggests that the impact on the technical efficiency of banks is more pronounced in the northern areas than in the southern areas. Furthermore, the Tobit estimation takes into account bank-specific differences in terms of total assets, the equity–total assets ratio, the labour–capital ratio and the provision–capital ratio; the evidence suggests that these influences are also mostly significant under financial liberalisation. As a result, the thesis suggests that financial liberalisation reinforces an independent impact on the technical efficiency of banks.

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The banking sector in South East Europe Countries (SEECs) has changed dramatically from the start of the transition process. The change in market structure has been associated with a change in market shares of banks. This thesis investigates factors that determine a bank’s market share. According to the literature, the main determinant of a bank’s competitive position is its efficiency. Hence, the first part of the thesis investigates a bank’s efficiency and its determinants, while the second part uses these efficiency estimates along with other bank-specific factors and regulatory variables to investigate the determinants of a bank’s market share. The analyses are conducted in eight SEECs for the 2000-2012 period. Stochastic Frontier Analysis, specifically the Random Parameters Models (Greene, 2005) and the Battese and Coelli (1995) models, are employed for estimation of the bank’s cost efficiency. The empirical findings suggest that the choice of methods of investigation matters, with the Battese and Coelli models performing poorly, which supports the critique that these models are data dependent. The banking sector in Slovenia is the most efficient in the region while that in Serbia is the least efficient. The thesis then investigates the market share of banks which is argued to depend on “inside” bank determinants (cost efficiency, investment in quality of service, risk-taking, capital, ownership structure, etc.) and “outside” bank determinants (regulatory and supervisory practices and macroeconomic variables). A direct theory of market share is undeveloped in the literature; hence, several related strands of theory are examined to develop a model for estimation. It is argued that a bank’s market share is the result of a dynamic process; hence dynamic panel estimation is applied. The empirical findings suggest that the effect of efficiency on a bank’s market share depends on its size. Taking more risk, being a more capitalized bank relative to the industry average and investment in quality (expanding branch network) contribute to higher market share. Stringent capital requirements, private monitoring and official supervisory power are found to be associated with a less concentrated banking industry. However, the effects of regulation on bank-level market share are found to vary with different risk-taking behaviour of banks.

This thesis explores the relationship between what investors say on online social media and price movements in financial markets. Recent studies have applied techniques from the natural language processing literature to distil the content of blogs, micro-blogs and user generated content sites to a ‘sentiment’ measure, pertaining to whether the content is good or bad for a given stock. Sentiment is then measured over a time series and compared to stock price returns. There is general agreement in the literature that a relationship between online sentiment and returns exists, but the strength, sign and timing of this relationship vary across studies. In this thesis I argue that this type of sign-strength-timing variability is an inherent part of the sentiment-price relationship. My rationale for this is that existing sentiment metrics miss important contextual information that can significantly alter the interpretation of a piece of text. The fact that sentiment measures lack this type of contextual awareness means that the relationship between sentiment and price will vary based on factors that are latent from the sentiment measure. Based on this argument I make three key contributions in this thesis: firstly, I document significant evidence that sign, strength and timing variability are a characteristic feature of the online textual sentiment-price relationship. Secondly, I develop a novel time series analysis methodology, signal diffusion mapping (SDM), that is capable of modelling and forecasting effectively based on relationships that are characterised by this type of variability. Third, I show that when appropriately modelled using SDM, it is possible to use the sentiment signal to forecast prices. Using this methodology I document that the sentiment-price relationship is much stronger than has previously been assumed in the literature. I go on to show it is possible to develop trading strategies based on SDM that generate excess returns once reasonable costs have been accounted for. I conclude that there is economically meaningful financial information in online social media, and that a characteristic of this information with respect to prices is variability. Modelling variability more accurately using SDM opens the possibility for using online information directly in asset pricing models or trading strategies.

The purpose of this thesis has been to investigate the market structure, profitability, competitiveness and productivity of commercial banks operating in the MENA economies for the period 1999-2012. The study first measures whether the banking industry in MENA economies has been concentrated or not, and aims to investigate the relationship between market structure and banks’ profitability; then examines whether a bank’s performance can be better explained by the Structure-Conduct-Performance (SCP) hypothesis, that claims that a highly concentrated market leads to collusive behaviour among larger banks, resulting in superior performance hypothesis or by the efficient hypothesis (EH) that claims that the positive association of market share of a bank and higher performance is caused by the bank’s superior efficiency. Empirically, I apply the Panzar-Rosse model to investigate which can be beneficial to policy makers, by illustrating how to shape policies which positively affect the market competition and safeguard stability of the financial sector. Finally, the study assesses changes in banking productivity by employing Data Envelopment Analysis (DEA), and the findings will be able to show bank managers, market participants and policy makers the sources of productivity of commercial banks and to assist them for optimum resource allocation strategies. This study examines markets that were found to have different degree of market concentration, and assesses the relevance of SCP and EH paradigm. The results of panel analysis and GMM estimators, provide evidence that the SCP hypothesis is not rejected, emphasising that increased market power yields monopoly profits. The fact that the impact of market concentration is positive in MENA economies is vital evidence, at least to a certain extent. On the other hand, Market share (MS) is found in most regressions using fixed effects to be positive and highly significantly different from zero, whilst market concentration is equal to zero, supporting the argument that if a bank enjoys a higher degree of efficiency in respect to good management and technology than its competitors, it can easily gain a larger market share by lowering its prices and earning economic profits However, also the thesis finds a positive and significant relationship between net interest margins, profitability and capital adequacy, suggesting that commercial banks in the MENA economies still need to be highly capitalised so as to be viable and to operate profitably. Spending on technology and fixed assets is found to contribute in making banks more profitable, but banks’ size not, indicating that policymakers, regulators and managers of banks in the MENA region should encourage mergers that lead to significant investments, instead of simply increasing the size of the new scheme. Poor cost management is one of the largest contributors to poor performance for commercial banks in the examined period. Overall, the thesis finds evidence of structural reforms and uncovers measures that have led to the improvement of regulation, and the implementation of frameworks which should continue to improve competitiveness within MENA banking sectors. In addition, future policy on the banking sector should take account of differences in the factors that affect bank productivity in these countries which are distinctively different.

The recent financial crisis continues to draw attention in the literature given its deep impact. This dissertation investigates three main areas associated with the crisis. Firstly it focuses on bank default prediction models asking whether structural or accounting models can better predict default. In the second instance we investigate the credit rating agencies culpability in the financial crisis by attempting to trace the transmission from sovereign debt ratings to bank credit ratings, an area that is sparse in the literature. Finally we investigate the classification of bank ratings using four statistical techniques altering the independent variables with financial variables and principal components to assess which statistical method and technique is better able to classify ratings. In the first instance the analysis compares accounting and structural default prediction models using a logit analysis to predict default. The paper uses panel data on US banks from the Federal Deposit Insurance Corporation database between 1993-2015 and the analysis is developed on 536 defaulted bank years and 25,614 non-defaulted bank years. The dissertation goes on to evaluate the impact of sovereign credit ratings on the ratings assigned to banks. Using data on Euro zone countries by credit rating agencies Moody's, Standard and Poor's and Fitch between 2003-2013, I find that multiple notch sovereign downgrades do influence bank downgrades particularly in the crisis period. The study suggests that while a bank's financial fundamentals do play an important role in rating assignments the rating change of the sovereign provides stimulus for the amount of notches the bank is downgraded by. In the final chapter the empirical results suggest that the multiple discriminant analysis statistical model is the better classifier of bank credit ratings for all three rating agencies.

After the global financial crisis of 2008 policy makers around the world initiated a paradigm shift towards macro-prudential financial regulation of banks. As a consequence the regulatory authorities are tasked with the objective of “maintaining financial stability”. This PhD analyses the potential of this paradigm shift and identifies some of the issues of its objective. If maintaining financial stability is not fulfilled, systemic risk can again lead to damages to the financial and real economy in the form of a credit crunch as seen in the early stages of the crisis of 2008. From a practical perspective, the findings of this thesis provide useful support for policy makers by identifying the key challenges in times of distress: Manipulating the incentives of banks towards the objective of promoting financial stability, and identifying the biggest sources for systemic risk in the banking sector and preventing its propagation. Within an academic context, this thesis contributes to the nascent field of qualitative and quantitative research on systemic risk and contingent convertible bonds (CoCos) for the recovery and resolution of struggling banks. The conditional Value-at-Risk (CoVaR) methodology is a new approach to quantifying the systemic risk stemming from one particular bank. The empirical results of this thesis show that a bank’s systemic risk is dependent on the state of the financial environment. So, this methodology can help the new macro-prudential regulatory agencies in their supervisory review of a bank. However, the results can alter substantially, depending on the sample period. CoCos automatically decrease the leverage of a bank upon a specific trigger event. The bank’s capital ratio is reinforced instantaneously, making it more loss-absorbent. This thesis proposes a design that circumvents most of the issues identified in the nascent body of research that could limit CoCos. Specifically, and contrary to most proposals, it reinforces the natural order of shareholders and other creditors. With this, the moral hazard of banks is reduced and financial stability promoted.

Over the past few decades, research on factors fundamental to attracting investments burgeoned as researchers tries to understand better, the various conditions favourable to foreign investors. In Africa, however, literature on the bigger and more important question about the determinants of FDI has limitations owing to lack of depth, specificity and focus on individual countries, industries and the actual factors posing challenging to investors. The overarching purpose of the study is to advance and deepen knowledge on the political investment climate of South Africa, and it stemmed from the observation that the existing body of knowledge lacks depth and specificity in terms of literature on the bigger and important phenomena of the FDI determinants in individual African countries. This thesis is therefore, a gap-based project carried out to examine the political investment climate of South Africa, in order to identify and understand better, the political factors and challenges facing investors in the banking sector, knowledge of which is envisioned useful for painting a clearer picture of the political investment climate to foreign firms in South Africa. Researching from a qualitative methodological approach and a post-positivist perspective, the study sought for the perceptions of participants from the banking sector through semi-structured interviews with 34 officials from foreign banks, local banks, identified government departments and intermediaries, who were sampled using mainly the purposive and snowballing sampling techniques. Participants were asked similar open-ended questions, giving them voice to talk richly about their experiences in the light of the political investment climate, allowing the study to decipher the nature of the political challenges in the banking sectors of South Africa. A general inductive analytical approach to data collection and analysis was adopted. Data were collected and analysed through an analytical framework that the study developed. Thus, a framework developed to better conceptualise the current state of knowledge was used as a guide to develop the analytical lens through which the present feedback were analysed. A thematic analysis approach was regarded appropriate in order that the nature of the political challenges could be understood in a richer context. The outcome from this study is a new framework of political challenges and risks, developed to demonstrate that South Africa has its own unique political factors that impinge on business operations. The framework comprises of a web of interconnected themes, namely; socio-economic challenges, government institutions, political corruption and regulatory frameworks, which together, help paint a rich picture of the political investment climate of South Africa. Further, the framework dissects the political challenges to reveal their complex nature in terms of the sources, events constituting political challenges, and the subsequent impact on the operations of banks. The framework has also been linked and argued for in the light of the political challenges and risk classifications suggested in literature, which successfully helps locate this study within the FDI determinants body of literature. By so doing, the framework tries to shed light on the political investment climate of South Africa to foreign investors, thereby advancing knowledge on bigger and important phenomena of FDI determinants in South Africa. The thesis therefore fills the gaps in knowledge that resulted mainly from treating Africa as one huge country, as it reveals the existence of the political investment climate obstacles that are unique to South Africa and have not been exposed in such a manner, hitherto this study. As a way forward, the study suggests for future research, focused research to expand knowledge on the various investment climates in Africa, in order to understand better, and to theorise sufficiently, the actual nature of challenges that impedes investment operations. Such specific knowledge is critical to the understanding of conditions favourable to FDI flows to African locations.