Management accounting research has previously focused mostly on large firms rather than SMEs despite the significance of SMEs in the UK economy. The high failure rate of small enterprises in the UK points to the need to increase their financial robustness. Small accounting practices (SAPs) would seem to provide a possible alternative source of management accounting information for businesses too small to afford in-house accountants, but the literature over thirty years suggests that this approach has not been adopted. The sparse research in this area has proposed disparate reasons for the limited use of SAPs, without providing a definitive explanation. The intractability of the barriers to the use of SAPs for the provision of management accounting information points to a mismatch between management accounting theory, which tends to be based on neo-classical economics, and the approach used in practice in small firms and SAPs. The research investigates these barriers, assessing the extent to which owner-managers carry out management accounting in small enterprises despite the opportunity costs involved and explores the reasons behind their tendency not to seek management accounting services from SAPs. It also evaluates the potential of SAPs to provide management accounting services and the reasons limiting their promotion. The research draws on a critical realist perspective using qualitative, multiple case studies involving semi-structured interviews to examine the degree to which neo-classical economic theory,old institutional economics and new institutional sociology can explain how the barriers have arisen and why they have remained. The findings expand existing research on management accounting by bringing into focus the interaction between actors and their structural context in small firms and SAPs, demonstrating how that shapes management accounting practices, particularly with regard to the barriers to the greater use of SAPs.

The link between Environmental, Social and Governance (ESG) shareholder engagement and financial risk and/or return is a very novel topic within the wider relevant literature. While prominent theoretical and empirical research has studied shareholder activism in the form of raising shareholder proposals, literature specifically pinpointing shareholder engagements, a rapidly growing alternative form of activism, is scarce. This thesis provides a quantitative analysis of a leading UK activist’s (Hermes Equity Ownership Services) ESG shareholder engagement and its impact on investment risk as well as the role of additional determining engagement factors lying behind these financial impacts. First, I investigate the issue of the ESG engagement effect on investment risk by examining the respective differences between target firms and control firms during the entire engagement period. The main finding is that ESG shareholder engagement creates a demonstrable value protection effect. The engagement targets have significantly less downside risk and Value at Risk than control firms. This result holds for subsamples of engagements related to governance theme, the combination of governance and social themes, and the combination of governance and environmental themes. However, this risk reduction effect disappears for environmental or social engagements alone. Moreover, I find that reduced risk only manifests for engagement targets that take actions/strategies to meet the investors’ requirements. Secondly, I analyse ESG engagement effects on investment returns and find little evidence of a strong association between the two. This conclusion holds for subsamples created by theme, industry or geography. I argue that ESG engagement hardly delivers any abnormal returns in the long run when the market learns the anomalies associated with ESG information. Thirdly, I further explore the financial impacts of ESG engagement and the mechanisms underlying it, focusing on the extractive industry only. I find that a successful engagement produces in average lower downside risk than a less successful engagement.

This thesis aims to examine the extent to which the UK's SMEs face credit rationing and to examine the impact of monetary policy on the availability of bank credit to the UK's SMEs, and the substitution relationship between bank credit and trade credit. The estimation is based on a large dataset between 1991 and 2010. Using disequilibrium model of credit rationing to estimate the impact of monetary policy is able to detangle the effect of demand from the supply and it overcome the identification problem in the previous studies of credit channel of monetary transmission. An index of monetary condition (MCI) that incorporated both interest rate and exchange rate in the estimation has been used as a measure of monetary condition in the UK. The results show that the demand for bank loans for small and medium sized firms increases when they have stronger needs of working capital and investment, lower level of internal cash flow and trade credit, and larger firm size. This is compared to micro sized firms in the sample which their demand for bank loans increase when they have more internal cash flow and trade credit, lower needs of working capital but stronger for investment, and firm size. The supply of bank loans for UK's SMEs was determined by firm risk, size, collateral, trade credit, and if it belongs to the manufacturing industry. The result also confirms that lower proportion of medium firms were borrowing constraint than micro and small firms. Based on the fixed effect panel data estimation method, the results show that small and medium sized firms that are borrowing constraint use more trade credit than unconstraint, and those borrowing unconstraint tend to extend more credit to other firms when they have access to bank credit. The results provide practical knowledge for policymakers regarding the financing of the UK's SMEs, which plays a key role in the UK economy.

A growing body of literature in investment appraisal has focused on bounded rationality of managerial decision-makers. It mostly addresses the actual investment decision stage, i.e. project approval. The investment decision is usually supported by a financial appraisal of the investment projects under consideration. Bounded rationality of the decision-makers determining the parameters of a financial appraisal have, however, attracted little attention. In the field of judgement and decision-making, decision-makers have been found to rely on a variety of effort-reducing strategies, i.e. heuristics, when making a judgement. This work addresses heuristic reasoning in the narrow field of setting the parameters required for a discounted cash flow analysis. Both dimensions, the projection of cash flows and the setting of a risk-adjusted hurdle rate, have been found to incorporate a high degree of subjective judgement. Moreover, given the complex and uncertain environment of companies and of the investment context in particular, optimal parameters may be difficult to determine. This work identifies heuristics that actors involved in this narrow stage of investment appraisal intuitively apply. It proceeds in two steps. First, and based on a conceptual framework, a qualitative study of practitioners detects and classifies indications of judgement in the projection of cash flows and in the setting of a hurdle rate. The findings that are indicative of heuristics translate into hypotheses for a second, quantitative study: Five experiments on practitioner-proxies are used to examine heuristic reasoning in the narrow contexts of investment appraisal. We find evidence that the affect heuristic and the anchoring effect substitute the more difficult judgement of a project’s risk that is manifested in a project-specific hurdle rate. Our hypothesis that the availability heuristic may also be involved in judging project risk cannot be confirmed; it is not found to contribute to an explanation of the paradox of setting hurdle rates higher than appropriate. As regards the projection of cash flows, application of the representativeness heuristic was not found to be applicable – despite strong indications in the qualitative study. Strong evidence is found in favour of the anchoring effect in making cash flow estimates – with finance or accounting experts being particularly prone to rely on arbitrary anchors. A sixth experiment investigates the practice of adjusting hurdle rates to mitigate the risk of overconfident cash flow projections. This work therefore contributes to an enhanced understanding of the role of judgement and the underlying judgemental processes in the two dimensions of investment appraisal. It highlights boundedly rational behaviour of the actors involved in the vital process of investment decision-making which has not been systematically addressed elsewhere. It can contribute to an improved understanding of organisational behaviour and ultimately to corporate success.

This thesis examines the determinants of CEO compensation. It consists of two main studies. The first investigates the effect of compensation consultants on CEO pay levels and incentives, using a sample of large UK firms from the FTSE 350 index from 2003 to 2011. Its key focus is whether the effect of compensation consultants persists after controlling for endogeneity. Using OLS regressions and controlling for firm, CEO and corporate governance characteristics reveals that the presence of compensation consultants is positively associated with both CEOs’ pay level and the percentage of equity-based pay. However, the presence of compensation consultants is endogenous. After controlling for selection bias using firm fixed effects, CEO fixed effects and propensity score matching, no significant correlation is found between compensation consultants and the level and composition of CEOs’ pay. This study also investigates the effect of governance quality, and finds that the effects of compensation consultants are different in firms with good and bad governance. Again, there is no evidence that compensation consultants are used by entrenched CEOs to increase total pay, even in firms with bad governance. In general, these results support optimal contracting models rather than managerial power models. The second study investigates the relationship between foreign experience and CEO compensation using a sample of large UK firms from the FTSE 350 index from 2003 to 2011. It focuses on determining whether foreign experience is valuable to CEOs. The findings reveal that foreign CEOs and national CEOs with foreign working experience receive significantly higher levels of total compensation than those without, and that this foreign-CEO pay premium is stronger in firms that are more globalised. The results are robust to controlling for firm-specific economic and corporate governance characteristics, as well as endogenous CEO selection using propensity score matching. The results show that pay premiums are attributable to the specialist foreign expertise and foreign networks of CEOs, which stem from foreign experience rather than broader general managerial skills.

Corporate governance mechanisms are formed of different building blocks; the board of directors and audit committees are considered to be of the main ones. Nowadays, there has been a significant change, worldwide, in the guidelines and relationships connecting the shareholders, the boards, and the corporate management. The size of foreign investment attracted to Egypt, being an evolving market, has been growing in the past ten years. Corporate governance quality and firm performance are considered among the most important factors for investors in the Egyptian market. This research investigates the influence of board of directors and audit committee characteristics on the firm‘s financial performance. Nine attributes have been revealed from the literature review that might affect the improvement of a firm‘s financial performance. In corporate governance, these attributes are categorized into board of directors‘ characteristics: board independence, size, CEO duality, director ownership, and board meetings frequency; and audit committee related characteristics: size, audit committee independence, meeting frequency, and financial expertise. Two models are constructed and 56 firms listed on the Egyptian stock exchange are used in this research as a sample for testing these models. The research covers a nine-year period (2004-2012). Nine hypotheses are derived from the two models. GLS (random effects) regression is used to test these hypotheses. The overall results revealed that board and audit committee characteristics affect a firm‘s financial performance. The results reveal that board size, meetings frequency and CEO duality are positively and significantly associated with firm performance. Furthermore, audit committee independence, frequency of meetings and financial expertise have a significant positive association with firm performance, while audit committee size has a considerably negative association with firm performance. This research contributes to the literature regarding how corporate governance improves a firm‘s financial performance in Egypt. Participants in the stock market would benefit from the results when evaluating the board of directors and the audit committee roles in improving the firm‘s financial performance. Regulators can use the findings of this research to help them identify the essential attributes of corporate governance and to evaluate the board of directors and audit committee governance practices.

The design of business processes often ignores detailed consideration of service cost. With competitive market pressure, this has become a key factor for the service sector. Along with cost, customer satisfaction is a driving force in all organisations these days. In an increasingly competitive marketplace, due to the current emphasis on service throughout the whole economy, businesses must fight to attract and retain their customers. The response time for modification, or reengineering, of existing processes and the creation of new processes is important in the service sector – this is usually required in a short period of time in order to respond to market and/or customer demand. Thus, there is a requirement for the automation of business process reengineering in order to facilitate this and to minimise response time. In order to address the above, the research carried out during this project involved the design and development of a framework to integrate an activity based cost estimating approach which takes into account probability of resource usage in variable processes, with an automated business process reengineering technique which incorporates an evolutionary computing (genetic algorithms) based optimisation module. Along with this, a novel methodology for detecting risk of negative impact on levels of customer satisfaction without the availability of customer related data has also been developed and integrated with the reengineering technique - cost reduction being the primary objective, but not at the expense of customer satisfaction. The overall aim is to automate the reengineering of business processes to as great an extent as possible in order to save potentially considerable human time and effort. The development of the automated framework also included the creation of a numeric process representation mechanism in order to enable quantitative analysis of complex business processes. The framework is implemented within a prototype software platform for expert validation.

This research concerns relationships between effective IR and stock pricing and stock liquidity and analyst coverage. This thesis develops the IR literature by using an original and focused measure of IR performance, numbers of firms' nominations for the Investor Relations Magazine IR awards 1999-2002, and by testing for any direct relationships between firms' number of award nominations and stock price, liquidity and analyst coverage over periods surrounding these awards and by exploring a wider range of firm characteristics compared to existing research. It is motivated by a seminal paper claiming that effective IR indirectly reduces the cost of equity capital, based a chain of existing research (Brennan and Tamaronski, 2000). Firstly, effective IR increases analyst coverage by reducing analysts' information-search costs, (Bhushan, 1989b, Lang and Lundholm, 1996, Francis, Hannah and Philbrick, 1997, Holland 1998b). Higher coverage can directly reduce information asymmetry and trading costs, increasing liquidity and indirectly increasing equity trading volumes (Brennan and Subrahmanyan, 1996). Finally, Amihud, Mendelson and Lauterbach (1997) show a direct inverse relationship between stock liquidity and stock prices, thus completing the putative chain between effective IR and a reduced cost of equity. However, any research showing a direct relationship between effective IR and the cost of capital is limited, with Botosan (1997) only finding a direct negative relationship for a sample of US firms with effective annual reports and low analyst coverage, and more recent research by Botosan and Plumlee (2002) shows no relationship to firms' IR ratings from analysts of the Association of Investment Management and Research (AIMR). I find, firstly, that prior to the IR awards the smaller-sized firms earn excess equity returns and a positive relationship between the number of firms' IR award nominations and prior analyst coverage. Secondly, I find that subsequent to the IR awards the firms continue to have high levels of analyst coverage, but do not earn excess stock returns. These findings suggest that analysts cover high momentum small-firm stocks and generally follow firms with effective IR, and also contributes to other research on prior factors that appear to influence firms' ratings in subjective firm-surveys, which behavioural finance attributes to the survey respondents' psychological preferences and biases. Finally, I find that effective IR is associated with a subsequent significant increase in stock liquidity and a reduced cost of equity, consistent with information risk and agency theories, which predict that effective IR will reduce risks attached to stocks due to high information asymmetry.

As a result of the agency problem, earnings management may take place due to the high contracting costs, shareholders’ bounded rationalities, and information asymmetry. Therefore, three main groups of motives have been identified to explain earnings management behaviour at the contracting, capital market, and external levels. While the previous studies have individually examined those motives, this thesis provides evidence that they interact in determining earnings management behaviour. The first empirical chapter of this thesis focuses on the contracting factors and examines the impact of earnings management on executive compensation conditioned on managerial ability. It finds that managers who utilize accrual earnings management receive higher compensation than those who undertake real earnings management. However, high quality managers are rewarded less for accrual earnings management and punished less for real earnings management. The second empirical chapter examines the non-linear effect of market concentration as an external motive of earnings management. It documents that accrual earnings management increases in concentrated markets as the quantity of information decreases. However, the sophisticated real earnings management starts to substitute for discretionary accruals at higher levels of market concentration when the quality of information declines. The third empirical chapter combines factors from the contracting and external motives. It examines the effect of market competition on the relationship between managerial ability and earnings management. The results show that in the face of increased competition, high quality managers manipulate earnings via accruals rather than more costly real earnings management. Overall, the results of this thesis show that management compensation is a crucial factor in assessing the costs of earnings management at the firm level. An optimal level of market concentration exists and should be considered by the regulators. Finally, understanding how industry level factors influence managerial decisions at the firm level is essential to explaining earnings management behaviour.

This thesis makes a significant contribution towards an underdeveloped yet growing strand of research that has emerged in recent years seeking to identify which specific factors are most influential on the savings behaviour and decision-making of scheme participants in broad-based employee stock ownership plans. More specifically, this study conducts empirical analysis into a savings related share option scheme known as Save As You Earn in the pursuit of answering three key research questions. The first research question seeks to identify which factors best account for how much a scheme participant chooses to place within their plan. The second research question focuses on identifying which variables are shown to alter the concentration of monthly savings directed into Save As You Earn as a proportion of a scheme participant’s total monthly wealth. The final research question focuses on which determinants best explain decisions at the point of maturity, when scheme participants are faced with the opportunity to purchase shares in their employer or take the cash. In terms of the explanatory variables explored, this study includes measures for socio-demographic factors, employment-related attributes, motives for joining, attitudes towards their employer and job, risk preferences, perceptions of past share price movements and whether a scheme participant has received financial education. The research findings presented within this thesis are derived from conducting univariate, bivariate and multivariate statistical analysis upon a cross-section of two thousand and fifty one survey responses from ten separate companies from a across range of industries. While this study finds that some traditional economic factors are partially able to explain a scheme participant’s savings behaviour, the major academic contribution of this research is to document that financial literacy and financial education has a recognisable and notable impact on a scheme participant’s financial decision-making.