This thesis focuses on irregular payouts as a flexible tool in distributing excess cash in UK listed companies. This thesis is comprised of three studies: the first study investigates the intervening effect of defined benefit (DB) pension schemes on irregular payouts of excess cash. The evidence indicates that the existence of DB schemes lowers both the propensity and the magnitude of excess cash distributed to shareholders. The extent to which defined benefit pension schemes affect irregular payouts is conditional on the characteristics of excess cash, where irregular payouts of less (more) transitory excess cash flows are more (less) likely to be affected. Evidence that more transitory excess cash flows will be paid to shareholders rather than being used to fund DB schemes justifies the Pension Regulator’s concern of the conflicts between pension contribution and corporate payouts. Further study reveals that DB schemes also help to limit the scope of over-investment of excess cash. In the second study, I investigate firms’ excess cash policy during the financial crisis period (2008-2011) by focusing on the distribution and the valuation of excess cash during the crisis period. Findings reveal that investors attached a lower discount to excess cash during the crisis period. Consequently, the positive association between irregular payouts and excess cash is significantly weakened during the crisis period. Further analysis suggests that investors place more emphasis on the benefits rather than the costs of excess cash during the crisis period. Moreover, firms retaining excess cash under the precautionary motive during the crisis period do not seem to have typical agency problems such as under-performance or over-investments, during the post-crisis period. In the third study, I investigate the flexibility of share repurchases by examining market reactions towards repurchase reduction decisions. In contrast to the conventional view that cutting repurchases is costless, I document significantly negative abnormal returns when firms announce a repurchase reduction decision. While there is only weak evidence that such reactions differ by announcement type, there is strong evidence that investors’ reactions do differ according to the justifications offered.

This thesis consists of two studies related to the disentangling of moni­toring effectiveness and managerial entrenchment, and the examination of their distinct effect on corporate cash decisions. In the first study, I design a discrete-time model of delegated cash man­agement where effectiveness of monitoring and managerial entrench­ment are explicitly accounted for. The solution supports that both more effective monitoring (stronger governance) and higher manage­rial entrenchment (weaker governance) lead to higher cash holdings. The model also predicts that more effective monitoring has a positive effect on the marginal value of cash, while managerial entrenchment a negative one. I empirically test my predictions on a large sample of US firms. The empirical results confirm my model’s predictions. My findings provide, among others, an explanation as to why aggregate proxies for the quality of corporate governance are unlikely to capture its twofold effect on cash holdings. In the second study, I extend the analysis to a dynamic setup in order to theoretically investigate a wider set of effects. I build a continuous-­time model where refinancing is possible, but costly. Shareholders make active decisions regarding the firm’s refinancing policy (equity issuances), whereas the payout decision remains with the manager. The model implies that the marginal values of cash can be less than one. This result matches empirical findings on the value of cash more closely than standard cash accumulation models. Regarding the effects of monitoring effectiveness and managerial entrenchment on the levels of cash, the results are in line with those of the first study. The model produces a novel result regarding the effects of monitoring effective­ness and managerial entrenchment on the value of cash. That is, the relation between the effectiveness of monitoring and the value of cash is U-shaped indicating that tightening monitoring might in fact result in lower values of cash. Given that the effect of entrenchment on the value of cash is unambiguously negative, the result indicates higher values of cash may be associated with enhanced external corporate control mechanisms, but not necessarily with stricter internal monitor­ing procedures. Although risk management policy largely depends on the respective control rights, my model reveals a substantial range of cash levels in which both parties benefit from risk-reducing operations.

No description available.

The major aim of this research is to investigate the changing role of the state in South Korea (henceforth Korea) after the financial crisis of 1997. Considering the complexity of Korean dynamics in this period, the change in financial systems and the country’s developmental state will be the main points of focus. In order to analyse the main focus of thesis, the research will be simply the process of answering to the questions of, “What has been essential to both state definition and finance in Korea?” and, therefore, “How essential is the state’s definition and the role of the state in finance when examining how far Korean state has changed in the aftermath of the 1997 financial crisis?” In this thesis the core question is this: “How has the Korean developmental state changed since the 1997 financial crisis? And has this change influenced the role of the state in finance as well as the structure of the state bureaucracy?” In Korea, as a representative structure of developmental states, the financial system was a kernel of the state-leading developmental plans; in other words, it is how the state could control over ‘capital’ and execute ‘industrial policy’ for the state’s aim of economic development. Two subordinate issues therefore need to be raised to figure out the outline of the process of the changing role of the state before and after the financial crisis: “Whether state’s purpose to reinstate its crucial role by restoring the attributes of a developmental state through the public fund after the 1997 crisis was successful or not” and “what was the direction of the financial supervision system reform after the 1997 financial crisis in Korea? And was the direction matched the goal pursued by the state?” Before the 1997 crisis, Korean developmental state had already been changing in many ways; the success of economic development raised the issue of different roles of the state to previous ‘strong’, ‘economy-centred’ and ‘coercive’ role of the state. However, it is true that the financial crisis accelerated this issue as a crucial subject of the developmental state theory. As Korea has been transformed to different types of state, changing roles of the state has been inevitably required after the financial crisis. Under this situation, this thesis will conduct some empirical researches to find answers to the main question and subordinate questions.

By analysing UK media narrations surrounding the global financial crisis, this thesis presents a critical engagement with existing constructivist institutionalist literature. Through the application of a ‘dynamic tracing’ methodology to British broadsheet newspaper discourse from 2007-10, the thesis reveals three significant, and interconnected, dynamics. Firstly, it highlights the existence of ‘ideational reversion’, whereby after a short period of flux through late-2008 and early-2009, prominent discourses by and large returned to the pre-crisis status quo ante. By analysing the pre-crisis, crisis, and post-crisis discourse holistically, a notably higher degree of overall ideational stability is found than the existing literature suggests would be the case. Secondly, it is demonstrated that ideational disjuncture within media commentary was effectively ‘siloed’ in the financial sector, meaning that the perception of crisis did not challenge broader conceptualisations of the neo-liberal economy. Thirdly, the impact of such reversion and siloing was to provide a greater social source of legitimacy, or strategic advantage, to orthodox austerity narratives than to their Keynesian alternative. On the back of these observations, conceptual extensions are put forward that involve developing a greater focus on the ‘stickiness’ of pre-existing discourse through crisis periods.

This thesis considers the 2007/2008 financial crisis as the cause and the catalyst for the establishment of the Eurozone response and the establishment of the European Financial Stability Facility, the European Stability Mechanism, and the expansion of the stability framework in which these operate. The thesis further considers the actions of Germany and France as the main contributors to the establishment of the rescue plan for the Euro. What are the implications of global change for European welfare states in the context of global and Euro Zone crisis? The German and French actions will be considered within a national framework shaping the EU’s institutional processes. Germany and France have the ability to shape the state’s understanding of its role within political economy and its responsibility to care for the welfare of its population. These issues are investigated using a most similar case study approach. This approach will be complemented by Susan Strange’s theory of structural power applied to Germany and France. This thesis will focus on Germany and France because of their status as Europe’s two largest economies and motors of the European integration process. The analysis includes quantitative and qualitative data, which are used to investigate the change in the national conception of the role of the state within the economy and its requirement to provide welfare to its people. This thesis will demonstrate that the German and French states’ reconfiguring of state-society relations, leads to the end of the traditional concept of the state. The thesis will also demonstrate that unilateral movement on the side of either Germany or France will likely result in long term adverse political economic consequences for Europe, which can be averted if Germany and France manage to develop and most of all maintain a balanced effort to resolve the Euro crisis.

This thesis makes three distinct contributions to the literature on factor-augmented models for forecasting economic time series using big datasets. The first chapter extends Diebold-Mariano-West type tests of forecast accuracy to apply to factor-augmented models where both factors and model coefficients are estimated in a rolling out-of-sample estimation procedure. This set-up poses new challenges as the sign of neither the factors nor factor-augmented model parameters are identified in different rolling windows. We propose a novel new identification strategy which removes arbitrary sign-changing in the sequence of out-of-sample parameter estimates and allows us to establish the asymptotic normality of the Diebold-Mariano test statistic. We propose a new bootstrap procedure for rolling factor estimates as existing bootstrap methods cannot deal with the generated regressor structure of the factors. The second chapter provides consistent information criteria for the selection of forecasting models which use both the idiosyncratic and common factor components of a big dataset. This procedure differs to existing factor-augmented model selection techniques as it depends on estimates of both the factors and the idiosyncratic components. We show that the combined estimation error vanishes at a slower rate than in the case of pure factor-augmented models in most standard economic forecasting scenarios, which makes existing information criteria inconsistent. We solve this problem by proposing modified information criteria which account for the additional source of estimation error. The final chapter aims to improve factor-based forecasts by 'targeting' factor estimates with two objectives: (i) so they are more relevant for a specific target variable, and (ii) so that variables with high levels of idiosyncratic noise are down-weighted prior to factor estimation. Existing targeted factor methodologies are only capable of estimating factors with one of these two objectives in mind. We suggest new Weighted Principal Components Analysis (WPCA) and Targeted Generalized PCA (TGPCA) procedures, which both use LASSO-type pre-selection.

The issue of coordination is one that has received significant attention in the experimental literature. In this thesis I delve deeper into this by combining and exploring a number of issues from the literature in economics and the social sciences in the context of coordination games. More specifically in all three chapters a common theme of the examination of the efficiency-equality trade off in coordination games prevails. In the first chapter I take inspiration from Holm’s (2000) paper ''Gender Based Focal Points'' and look further into aspects of both the equity-efficiency trade off in coordination games and gender information. In the second chapter we combine elements of the coordination literature with the literature on the effects of punishment: Most previous investigations of punishment have concentrated on the effects of punishment when free riding is a possibility (for example Fehr & Gächter, 2000, Abbink et al., 2010) and here we are able to report results from an experiment where free riding is not a possibility. In the third chapter we investigate the effects of communication in coordination games. We take our initial inspiration from Cooper et al. (1990) and Farrell (1987) and expand on these papers by examining the effects of rich and free form communication between subjects and also expanding the type of games used in the experiment. We find a number of interesting results which will be described in more detail with this thesis. In chapter one we find that an inefficient compromise very quickly loses its appeal to subjects as its inefficiency increases. We also find that unisex pairings are more successful in term of expected payoffs from coordination games as compared to mixed gender pairings. In chapter two we find that, whilst gender information and punishment do not tend to affect behaviour in isolation, the two treatment variables combined do lead to observed behavioural changes. We also find gender differences in punishment behaviours with males becoming more aggressive in punishment when playing against a male and males punishing more aggressively than females. In chapter three we find that payoff structure is highly relevant in how the availability of communication affects choices in the game. Through our novel experimental design we show that subjects will use an equitable split of earnings as a focal point for coordination rather than out of an intrinsic preference for an equitable split of earnings.

The deviation of financial returns from normal distribution is a well‐documented stylized fact. Nonetheless, finance professionals and investors alike pay attention to these deviations almost only when a crisis erases years’ worth of gains. And despite decades’ worth of literature, the culprit for non‐normal distribution of financial returns is still not determined with certainty. In this research, I address the non‐normality of return distributions and financial crashes together. Specifically, I aim to identify the determinants of non‐normality in a high frequency setting and utilize these variables to forecast financial crashes. To this effect, multiple instruments and time horizons are considered. The contribution of this thesis is multifold. The “natural time” approach introduced here, uses order book variables to achieve normally distributed high frequency returns via subordination. In its essence, natural time is a two‐step procedure which uses high frequency order book variables as a gauge for variance while sampling in transaction time. Natural time provides the reader with a new lens to view the financial markets and underscores two important aspects of the high frequency world; sampling frequency affects the distributions we observe and order book variables such as liquidity are the key to heteroscedasticity in asset returns. So much so that subordination with order book variables under transaction time achieves the normal return distribution which underlies numerous financial theories we use today. I further extend the use of these order book variables by introducing the “market heat” metric. Market heat generates successful binary flash crash predictions and its success adds support to the claim that liquidity concerns may be the primary driver of price formation processes. Finally, I expand the findings of this research on high frequency asset returns to a macroeconomic setting by producing currency devaluation predictions for G10 currencies. The early warning systems produced here demonstrate that not only debt related macroeconomic variables but also liquidity related market variables are at play when it comes to currency fluctuations.

Price increase is important to any business for its inevitability as well as its potential for jeopardising a consumer base. The practical question is: how much of a price increase can consumers tolerate before they modify their shopping behaviours. Hence, the present study took the perspective of consumers, and focused on price tolerance, which was defined as the maximum price increase an individual consumer could tolerate before changing their shopping behaviour. The central research questions were: (1) what factors would cause some consumers to have a larger price tolerance than others, and (2) how do those factors influence price tolerance, and interact with each other? The present study was designed to contribute to business practices by providing theoretical guides; and to contribute to the literature of price tolerance by providing a conceptual framework with a holistic view. To understand various impacts, which price tolerance received from antecedents as well as interactions among those antecedents, the present study proposed a framework containing five antecedents of price tolerance. Three antecedents were reported in previous studies: consumer involvement, satisfaction, and consideration set size; whereas two were newly proposed: perceived motive fairness and convenience orientation. A survey was conducted among 277 students. Data were analysed in SPSS 16 and AMOS 16 using a structural equation modelling approach. Results of the present study confirmed some findings in previous literature. More importantly, new insights into price tolerance were gained through previously unreported findings: (1) Perceived motive fairness had a positive impact on price tolerance (2) Convenience orientation had a positive impact on price tolerance A final conceptual framework was proposed according to the findings of the present study. Future research could further explore the relationship between consideration set size and price tolerance through quantitative approaches. In addition, convenience orientation and its impact on price tolerance provided a fruitful ground within which future studies could further explore consumers’ concerns over nonmonetary costs.