The corporate finance literature generally views open market share repurchase announcements as a signal of equity undervaluation. Managers also frequently cite undervaluation as a rationale for their decision to repurchase firm equity. However, such an announcement cannot necessarily be viewed as a strong signal of firm undervaluation as it lacks characteristics of a credible signal. Firstly, managers are increasingly relying on share repurchases as a mechanism for distributing cash to shareholders. Secondly, open market buyback announcements are not binding obligation on the part of firm management to complete. In addition, such programmes have a positive effect on executive compensation, so managers can also employ these opportunistically to accumulate personal wealth at the expense of shareholders. Thus, buyback announcements can be either value signalling or agency driven. Since these two theories (agency vs signalling) are not mutually exclusive and a pure ex ante measure of managerial intent does not exist, the challenge is to distinguish value signalling announcements from “cosmetic” ones. My thesis consists of three papers (chapters 2-4). In my first paper, I test whether the market distinguishes between agency driven and value signalling open market share buybacks by observing the underlying managerial wealth and repurchase incentives. In theory, better convergence between the executive and shareholder wealth interests and risk preferences should lower agency costs thus increasing the “perceived” credibility of managements’ buyback announcements (signals). My results suggest that executive compensation arrangements play an important role in explaining the market reaction to, and actual share repurchase decisions of, firms that announce buyback programmes. This study makes an original contribution to the literature by demonstrating that investors approximate the value signalling effect of a buyback announcement by observing the underlying managerial repurchase incentives and respond accordingly. My second paper addresses the open market buyback announcement credibility issue directly by capitalising on the soft information conveyed in such announcements. This is novel to the literature on share buybacks. Recent studies show that news disclosure tone affects investor reaction to an information event. In my study, I demonstrate that the disclosure tone of buyback press releases contains value relevant information and has significant explanatory power for short term announcement returns. The hand collected data I use in this chapter also allows me to explore other aspects of buyback announcements where the extant literature is limited. In my third paper, I analyse insider trading behaviour around buyback announcements. The key insight of this paper is to infer insiders’ private information about firm value by observing their trading behaviour around the repurchase announcement event. Insiders add credibility to the (repurchase) undervaluation signal by trading parallel to their signal (i.e., purchasing more or selling fewer shares in advance of the repurchase announcement). However, insiders seeking to time the market (cash out at a higher price) will sell more shares post-announcement. My analysis shows that, consistent with the undervaluation signalling argument, investors respond more positively to buyback announcements where insiders buy more or sell less equity before the announcement event. However, I also document that insiders sell more shares (time the market) in the first 3-months post-announcement. This is especially true for firms that are less (more) likely to be undervalued (overvalued) and for smaller firms that present the greatest potential for gain through insider trading. My results suggest that net insider sales are significantly positively related to repurchase announcement returns. Finally, I show that higher post-announcement net insider sales are slightly negatively related to longer-term returns suggesting such firms do not out perform in the long-run. My research adds significantly to the literature on share buybacks by addressing the agency issues associated with share repurchase programmes. It finds that the market is conscious of the managerial incentives attached to repurchase programmes and the potential for their opportunistic use. Investor reaction to repurchase programme announcements is sensitive to executive compensation arrangements, the information content and disclosure tone of buyback announcement press releases and insider trading behaviour. This study seeks to add to our understanding of share buybacks and how the market treats and reacts to these announcements. The market realises that managements’ promises to spend billions of dollars on share repurchases may not necessarily add to shareholders’ wealth. Repurchase announcements cannot be uniformly viewed as a signal of equity undervaluation; insiders also use such programmes for personal gains. In summary, my research highlights novel factors that explain investor reaction to share buyback announcements.

Credit risk management is becoming more and more important in recent years. Credit risk refers to the risk that an obligor fails to make payments on any type of debt at the time of maturity. Credit risk models are statistical tools to infer the future default probabilities and loss distribution of values of a portfolio of debts. This doctoral thesis focus on the application of credit risk management in different areas. To better understand the credit risk management, in the first chapter, we introduce the basic ideas in credit risk management and review the models developed in the last decades. To empirical test the performance of models reviewed in the first chapter, in the second chapter, we compare the reduce-form model with the structural model based on the China’s stock market. It turns out that both models contribute to explaining the default risk of listed firms, however, reduce-form model outperformances the structural model. The empirical results from the second chapter suggests that reduce-form model can better predict the firm’s default risk, but the correlated default risk between firms has not been answered yet. So therefore in the third chapter, we investigate the correlated default risk using copula theory which has been introduced in the first chapter. Based on the insurances firms and other financial firms in the US market, both short-term and long-term default dynamic correlations are found. Another interesting finding from the third chapter is that insurance firms which were considered to be stable actually have higher default risk. This motive us to further explore the determinants of default risk of insurance firms in the fourth chapter and new risk factors (macroeconomic and insurance-specific variables) are found.

This thesis concerns the introduction of a Western idea of risk management to a peripheral control system as it examines the unintended consequences of re-embedding Enterprise Risk Management (ERM) in an Egyptian insurance company. It traces how ERM was introduced, constructed, modified, and re-defined over time, causing institutional complexity, heterogenic practices, and identity crisis. It ultimately seeks to understand how a new form of management control was made operable amidst local resistance. The research involved intensive fieldwork with in-depth interviews, direct observations, and documentation reviews. Drawing on institutional logics and Egypt’s geopolitical ramifications, it illustrates how Risk Based Management Control (RBMC) was introduced by Western agencies, how this new control system caused logics competition, and how some ambiguities in identities consequently developed. It was the emergence of the Arab Spring that negatively reacted to those pressures, resulting in great resistance that was amplified through a clash of civilizations as a proper communal understanding and action after the country’s revolutions, which this work calls a “geopolitical shield”. This analysis makes three contributions to RBMC and logics. First, it extends the institutional logics debate by illustrating that logics get re-institutionalized by the “place” through its cultural and communal identities that filter logic complexities to different ends. Secondly, it extends the cultural political economy of management accounting by illustrating that management accounting in less developed countries (LDCs) is also an operational manifestation of the geopolitics of locale, location, and place. Finally, it provides an illustrative critique for implementing RBMC systems, which in the West were previously cascaded to operational arenas successfully, as other researchers reported, but in the current case this cascading is disrupted by the geopolitical shield activation. Shield activation at the micro level not only successfully hindered RBMC and its apparatuses but also protected monologic controls from becoming heterogenic.

Corporate websites open wide avenues for companies to disseminate financial and non-financial information to target audiences in a fast, efficient and widely accessible manner. While website communication became a standard means for companies in developed countries, its utilisation, however, by their counterparts in developing countries is still negligible (Oyelere and Kuruppu, 2012). The current study aims to achieve three objectives. Firstly, to explore the patterns and amount of internet corporate reporting (ICR) practices of listed companies in Jordan. Secondly, to identify the determinants of various ICR practices of these companies. Finally, to investigate the determinants and perceived factors contributing to ICR adoption/non-adoption in Jordan. The key literature focuses mainly on economic-based theories in explaining different ICR practices as a voluntary disclosure channel. The theoretical foundation of this study, on the other hand, integrates several disclosure frameworks with innovation diffusion theories. The resulting framework involves dimensions of technology, management, organisation and environment. This was carried out to obtain a more in-depth interpretation of the ICR adoption phenomenon. Within the premises of the positivistic-deductive paradigm, the study relies mainly on three quantitative methods in collecting the required data. Firstly, a self-designed disclosure index of 109 items was used to survey companies’ websites, identifying levels of different forms of disclosure practices. Secondly, secondary data that include 15 companies’ attributes was gathered, specifying determinants of ICR adoption and practices. Finally, a questionnaire survey was conducted among CEOs and CFOs of companies to determine perceived factors that may further contribute to the adoption of ICR.Results of the survey from websites of 262 listed companies on the Amman Stock Exchange (ASE) in 2012, indicate that, around 150 companies (57%) had usable websites, while only 69 (26%) companies have engaged in reporting the investor relations information on their websites. Explanatory findings also show that, with varying degrees, ICR adoption and different disclosure practices of a firm are a function of its general characteristics, ownership and corporate governance structure. Based on managers’ evaluation, four factors were further identified as significant contributors of ICR adoption, namely cost-benefit balance, management commitment, internal technology readiness and users’ attention. This study represents an investigation into ICR adoption and practices among the listed companies in Jordan. Therefore, the ability to generalise the results may be limited to this context. Future research may also consider retesting the study model, regarding the perceived factors of ICR adoption, in other contexts. The study contributes in providing managers and regulators with a diagnostic tool, assessing the status quo of ICR as a voluntary disclosure practice in Jordan. The study also presents an assessment framework for ICR adoption and practices, which enable managers to evaluate the current status of the company regarding multiple aspects of readiness for engaging in ICR: organisation, management, technology and environment.

China has been growing rapidly over the last decades. The private sector is the driving force of this growth. This thesis focuses on firm-level investment and cash holdings in China, and the chapters are structured around the following issues. 1. Why do private firms grow so fast when they are more financially constrained? In Chapter 3, we use a panel of over 600,000 firms of different ownership types from 1998 to 2007 to find the link between investment opportunities and financial constraints. The main finding indicates that private firms, which are more likely to be financially constrained, have high investment-investment opportunity sensitivity. Furthermore, this sensitivity is relatively lower for state-owned firms in China. This shows that constrained firms value investment opportunities more than unconstrained firms. To better measure investment opportunities, we attempt to improve the Q model by considering supply and demand sides simultaneously. When we capture q from the supply side and the demand side, we find that various types of firms respond differently towards different opportunity shocks. 2. In China, there are many firms whose cash flow is far greater than their fixed capital investment. Why is their investment still sensitive to cash flow? To explain this, in Chapter 4, we attempt to introduce a new channel to find how cash flow affects firm-level investment. We use a dynamic structural model and take uncertainty and ambiguity aversion into consideration. We find that uncertainty and ambiguity aversion will make investment less sensitive to investment opportunities. However, investment-cash flow sensitivity will increase when uncertainty is high. This suggests that investment cash flow sensitivities could still be high even when the firms are not financially constrained. 3. Why do firms in China hold so much cash? How can managers’ confidence affect corporate cash holdings? In Chapter 5, we analyse corporate cash holdings in China. Firms hold cash for precautionary reasons, to hedge frictions such as financing constraints and uncertainty. In addition, firms may act differently if they are confident or not. In order to determine how confidence shocks affect precautionary savings, we develop a dynamic model taking financing constraints, uncertainty, adjustment costs and confidence shocks into consideration. We find that without confidence shocks, firms will save money in bad times and invest in good times to maximise their value. However, if managers lose their confidence, they tend to save money in good times to use in bad times, to hedge risks and financing constraint problems. This can help explain why people find different results on the cash flow sensitivity of cash. Empirically, we use a panel of Chinese listed firms. The results show that firms in China save more money in good times, and the confidence shock channel can significantly affect firms’ cash holdings policy.

Small businesses (SBs) are considered as one of the pillars of the economic structure, particularly in the developing countries. Kuwait, as one of these developing countries has high hopes for these small businesses to drive the economy as a major component of the economic reform strategy. The current research is complementary to previous efforts attempting to identify problems facing small businesses and the success factors of such projects in the state of Kuwait. This study can contribute to solving some aspects of economic and social problems in Kuwait. The first phase includes determining the effect of independent variables (financial problems, marketing problems, organizational and administrative problems, and legislative problems) on the success factors of SBs. The second phase includes the assessment of the effect of success factors on profits. The third phase includes the measurement of the effect of profits and SBs problems on the continuation of these SBs. The research sample comprises owners and managers running small projects, along with a group representing the supporting bodies of small projects in the state of Kuwait. The results show that only project management and the level of profit have a relationship with the problems facing small projects in Kuwait. Also it was found that there were significant differences between the views of relevant ategories of study about the success factors of small projects in Kuwait. In addition, it was found that there was a significant relationship between the problems facing small projects in Kuwait and the success factors of those projects. These problems explain 75.8% of variance in the success factors. However, there was a weak relationship between the problems facing small projects in Kuwait and the intention to continue the project. Those problems explain 2.6% of the variance in the dependent variable. Moreover, a significant relationship was found between the problems facing small projects in Kuwait and the level of profits earned, with the problems explaining 11.9% of the changes in the dependent variable. Also, it was found that there was a significant relationship between the level of profits earned and the intention to continue the project. Finally, specific recommendations have been introduced for policy makers and managers to benefit from this study. Furthermore, suggestions are made for future studies.

In most countries financial authorities regulate capital markets by monitoring banks’ lending activity and imposing disclosure requirements on issuers of publicly traded securities. However, most companies’ financial claims are not listed and many different investors, outside of the banking industry, affect credit expansion and capital provision to the real economy. Examples of non-banks capital providers include venture capital firms and money market funds. This PhD thesis focuses on the growing and largely unsupervised finance arena that lies outside of traditional banking intermediation or public capital markets. In the first chapter, “Are Family and Friends the Wrong Investors? Evidence from U.S. Start-ups”, I investigate the effects of funding from family and friends on firms’ subsequent access to venture capital. To address potential endogeneity of informal finance, I use an instrument that hinges on founders’ family size as an exogenous constraint on the supply of informal funds. My results show that informal finance reduces the probability of future financing events. In the second chapter, “Private Capital Markets and Entrepreneurial Debt: Evidence from U.S. Unregistered Securities Offerings” co-authered with Dr. Juanita Gonzalez-Uribe, we investigate the use of non-bank private debt by very early stage firms. Contrary to many accounts of start-up activity, we document that entrepreneurial firms have an important reliance on private debt. We show that late stage rounds are 3% more likely to be conducted with debt contracts but we find little evidence that collateral availability affects the issuance of private debt. Finally, in “Discipline in the Securitization Market”, I examine how investors’ sophistication in securitization markets affects efficiency of credit generation and loan performance. I find that it is never optimal to have a perfectly informed Buy Side, as it would constrain high quality credit generation. Furthermore, market discipline is facilitated by high risk free rates and diminished volatility in loan payoffs.

Copula theory is particularly useful for modeling multivariate distributions as it allows us to decompose a joint distribution into marginal distributions and a copula. Copula-based models have been widely applied in finance, insurance, macroeconomics, microeconomics and many other areas in recent years. This doctoral thesis particularly pays attention to applications of copula theory in quantitative risk management. The first chapter of this thesis provides a comprehensive review of recent developments of copula models and some important applications in the large and growing finance and economics literature. The first part of this chapter briefly introduces the definition and properties of copulas as well as several related concepts. The second part reviews estimation and inference methods, goodness-of-fit tests and model selection tests for copula models considered in the literature. The third part provides an exhaustive review of the extensive literature of copula-based models in finance and economics. Finally, an interesting topic for further research is suggested. The remaining three chapters investigate applications of copula theory in three topics: market risk prediction, portfolio optimization and credit risk estimation. Chapter Two investigates the dynamic and asymmetric dependence structure between equity portfolios from the US and UK. We demonstrate the statistical significance of dynamic asymmetric copula models in modeling and forecasting market risk. First, we construct ``high-minus-low" equity portfolios sorted on beta, coskewness, and cokurtosis. We find substantial evidence of dynamic and asymmetric dependence between characteristic-sorted portfolios. Second, we consider a dynamic asymmetric copula model by combining the generalized hyperbolic skewed t copula with the generalized autoregressive score (GAS) model to capture both the multivariate non-normality and the dynamic and asymmetric dependence between equity portfolios. We demonstrate the usefulness of this model by evaluating the forecasting performance of Value-at-Risk and Expected Shortfall for high-minus-low portfolios. From backtesting, we find consistent and robust evidence that our dynamic asymmetric copula model provides the most accurate forecasts, indicating the importance of incorporating the dynamic and asymmetric dependence structure in risk management. Chapter Three investigates the dependence between equity and currency in international financial markets and explores its economic importance in portfolio allocation. First, we find striking evidence for the existence of time-varying and asymmetric dependence between equity and currency. Second, we offer a methodological contribution. A novel time-varying skewed t copula (TVAC) model is proposed to accommodate non-Gaussian features in univariate time series as well as the dynamic and asymmetric dependence in multivariate time series. The multivariate asymmetry is captured by the skewed t copula derived from the mutlivariate skewed t distribution in Bauwens and Laurent (2005) and the time-varying dependence is captured by the GAS dynamics proposed by Creal et al. (2013). This model can be easily generalized from the bivariate case to the multivariate case. Third, we show that findings of dynamic and asymmetric dependence between equity and currency have important implications for risk management and asset allocation in international financial markets. Our empirical results show the statistical significance of the TVAC model in risk management and its economic values in real-time investment. Chapter Four studies the credit risk of UK top-tier banks. We document asymmetric and time-varying features of dependence between the credit risk of UK top tier banks using a new CDS dataset. The market-implied probability of default for individual banks is derived from observed market quotes of CDS. The default dependence between banks is modeled by a novel dynamic asymmetric copula framework. We show that all the empirical features of CDS spreads, such as heavy-tailedness, skewness, time-varying volatility, multivariate asymmetries and dynamic dependence, can be captured well by our model. Given the marginal default probability and estimated copula model, we compute the joint and conditional probability of default of UK banks by applying a fast simulation algorithm. Comparing our model with traditional copula models, we find that the traditional models may underestimate the joint credit risk most of the time, especially during a crisis. Furthermore, we perform an extensive regression analysis and find solid evidence that time-varying tail dependence between CDS spreads of UK banks contains useful information to explain and predict their joint and conditional default probabilities. Chapter Five concludes with recommendations for further study.

The first essay (Chapter 2) investigates debt-financed share repurchases. We find that debt-financed share buybacks generate positive short-term and long-run abnormal stock returns. Leveraged buyback firms have more debt capacity and lower growth prospects ex ante, increase leverage and reduce investments more sharply ex post than cash-financed buyback firms. Firms that are over-levered ex-ante are associated with lower returns and real investments following leveraged buybacks. The lower announcement returns are concentrated on firms with weaker corporate governance. Leveraged buybacks also have lower completion rates than cashfinanced buybacks. The evidence is consistent with leveraged buybacks enabling firms to optimize their leverage, on average benefiting shareholders. The benefits decrease with a firm’s leverage ex ante. The second essay (Chapter 3) studies the effect of the Supreme Court landmark Citizens United decision on how firms adjust their political activism under the constraints imposed on them by institutional investors. The essay shows that firms with more political connections have lower announcement returns, which are concentrated in firms with high institutional ownership. Furthermore, firms headquartered in states with corporate campaign contribution bans before Citizens United have relatively fewer state political connections afterwards. This result is concentrated in firms with low institutional ownership. The evidence is consistent with institutional investors’ preference to not use the new avenue of political activism. The third essay (Chapter 4) tests the dividend catering theory proposed by Baker and Wurgler (2004b) by using the Internet search volume for dividend-related keywords as a direct measure of investors’ dividend sentiment. We find that firms initiate or increase dividends when the dividend sentiment is stronger. These effects are concentrated on firms located in high dividend sentiment states. They are robust after controlling for firm characteristics, risk, and the dividend premium. Our results are consistent with managers catering to investor’s time-varying demand for dividendpaying stocks.

This thesis consists of three papers in the area of empirical finance. Chapter 2 investigates the role of realized jumps detected from high frequency data in predicting future volatility from both statistical and economic perspectives. We show that separating jumps from diffusion improves volatility forecasting both in-sample and out-of-sample. Moreover, we show that these statistical improvements can be translated into economic value. We find a risk-averse investor can significantly improve her portfolio performance by incorporating realized jumps into a volatility timing based portfolio strategy. Chapter 3 investigates the use of high frequency data in large dimensional portfolio allocation. We consider the use of high frequency data beyond the estimation of the realized covariance matrix. Portfolio strategies using high frequency data in measuring and forecasting univariate realized volatility can generate statistically significant and economically tangible benefits compared to low frequency strategies. Moreover, using high frequency data to separate realized volatility into different components and construct realized higher moments can also enhance portfolio performance. Strategies using upside and downside volatility components and using realized skewness can deliver incremental economic benefits over the strategy using total realized volatility alone. Chapter 4 investigates the pricing of volatility risks in currency markets. Firstly, we show that pricing volatility risk can be understood by pricing some of its components. We find that diffusive volatility dominates jump volatility in pricing carry trade returns, while jump volatility is important to explain the joint cross-section of carry trade and momentum returns. Both short run and long run components are priced, and the short run component is more important in general. Secondly, we suggest that factors similar to volatility in identifying bad states, i.e. volatility of volatility and cross sectional volatility are also priced in currency returns and they cannot be fully subsumed by conventional volatility risks.