This dissertation contains three empirical studies that examine the effect of investor protection on three different aspects of corporate governance: mergers and acquisitions, US cross-listings, and convergence of information environment around the world.1 The first study investigates the relation between investor protection and the choice of acquisition form (partial versus full acquisition). I argue that if private benefits are a motivation for mergers and acquisitions, an acquirer is more likely to bid for a controlling fraction (but not a hundred percent) of a target firm in countries with weak investor protection because in these countries private benefits of control are an important asset. The empirical results support this argument: compared to full mergers, partial acquisitions are the preferred form of acquisition when target countries do not effectively protect minority investors. Partial acquisitions are also more common among foreign acquirers from countries with poor legal systems. Finally, I show that firm-level corporate governance of the target firm is negatively related to the likelihood of partial acquisition. The second study examines the effect of investor protection on domestic liquidity for cross-listed firms. If US cross-listing can improve a firm’s information environment because of more stringent disclosure requirements in the US, I expect the information improvement to be reflected in a reduction in domestic liquidity costs. The empirical results are consistent with this prediction: local bid-ask spreads and price impact (a proxy for the cost of adverse information) significantly decrease while local trading volume significantly increases one year after US cross-listing. In addition, the liquidity improvement is larger for cross-listed firms that are from poor investor protection countries, and that are listed on the NYSE. The results in the second study are consistent with the “bonding” argument by Coffee (2002). The third study tests Coffee’s (1999) prediction of a convergence in corporate governance around the world. Since information environment is a key factor of corporate governance, it is important to see if there is a convergence in information environment across countries over the past two decades. Using various common proxies for information environment, I show that the quality of information environment generally improves through time, but the improvement is larger for developed markets and countries with better institutional quality. In the third study, I also reproduce the main results in Bailey, Karolyi and Salva (2006), and Fernandes and Ferreira (2008). These studies report similar divergence in information environment for cross-listed firms post-US-listing, but fail to control for the quality of information environment in the domestic market. After we control for this market effect, we do not find support for their results: there is no improvement in information environment for cross-listed firms, and no difference in the change between developed and emerging countries. 1 The second and third empirical studies are co-authored work with my supervisor, Professor Henk Berkman. For consistency, I use the first person ‘I’ throughout the dissertation.

This dissertation contains three empirical studies that examine the effect of investor protection on three different aspects of corporate governance: mergers and acquisitions, US cross-listings, and convergence of information environment around the world.1 The first study investigates the relation between investor protection and the choice of acquisition form (partial versus full acquisition). I argue that if private benefits are a motivation for mergers and acquisitions, an acquirer is more likely to bid for a controlling fraction (but not a hundred percent) of a target firm in countries with weak investor protection because in these countries private benefits of control are an important asset. The empirical results support this argument: compared to full mergers, partial acquisitions are the preferred form of acquisition when target countries do not effectively protect minority investors. Partial acquisitions are also more common among foreign acquirers from countries with poor legal systems. Finally, I show that firm-level corporate governance of the target firm is negatively related to the likelihood of partial acquisition. The second study examines the effect of investor protection on domestic liquidity for cross-listed firms. If US cross-listing can improve a firm’s information environment because of more stringent disclosure requirements in the US, I expect the information improvement to be reflected in a reduction in domestic liquidity costs. The empirical results are consistent with this prediction: local bid-ask spreads and price impact (a proxy for the cost of adverse information) significantly decrease while local trading volume significantly increases one year after US cross-listing. In addition, the liquidity improvement is larger for cross-listed firms that are from poor investor protection countries, and that are listed on the NYSE. The results in the second study are consistent with the “bonding” argument by Coffee (2002). The third study tests Coffee’s (1999) prediction of a convergence in corporate governance around the world. Since information environment is a key factor of corporate governance, it is important to see if there is a convergence in information environment across countries over the past two decades. Using various common proxies for information environment, I show that the quality of information environment generally improves through time, but the improvement is larger for developed markets and countries with better institutional quality. In the third study, I also reproduce the main results in Bailey, Karolyi and Salva (2006), and Fernandes and Ferreira (2008). These studies report similar divergence in information environment for cross-listed firms post-US-listing, but fail to control for the quality of information environment in the domestic market. After we control for this market effect, we do not find support for their results: there is no improvement in information environment for cross-listed firms, and no difference in the change between developed and emerging countries. 1 The second and third empirical studies are co-authored work with my supervisor, Professor Henk Berkman. For consistency, I use the first person ‘I’ throughout the dissertation.

The aim of this research study is to examine the impact of Saudi Arabian culture on corporate governance (CG) and its regulatory compliance with respect to the protection of minority shareholders’ interests. The protection of minority shareholders is a primary concern in the area of CG and particularly as defined by the Organization for Economic Co-operation and Development (OECD) principles. In Saudi Arabia, CG is a newly introduced regime. Its set of CG principles was initially issued after the first market crash in 2006, which signified the need for appropriate CG standards in Saudi Arabia because minority shareholders suffered catastrophic losses. Moreover, CG legislation in Saudi Arabia is still slowly moving from voluntary to obligatory because family-owned firms, which is the dominant form of incorporation, are stifling corporate growth by their reluctance to open their equity to outside shareholders, as argued by the OECD report of Koldertsova (2011). Hence, the conceptual framework for understanding how Saudi Culture affects minorities is based upon Hofstede’s (1980-2010) Cultural Value Dimension (CVD) model linking societal constructs with the legal and political milieu. Thus, this research sets out to examine this link in relevance to Saudi Culture. In addition, this undertaking will extend, via the second research question, to uncover other factors, such as the legal and political, influencing the level of compliance of listed Saudi corporations with the OECD principles with respect to the protection of minority shareholder rights. The findings of this study provides significant correlations between each of Hofstede’s CVDs: Individualism, Power Distance, Uncertainty Avoidance, Femininity, and Long Term Orientation and the quality of the exercise of minority shareholders’ rights as defined by the OECD’s principles of CG in Saudi Arabia. Moreover, the distribution of each CV dimension was found not to be the same when comparing groups of Majority and Minority shareholders. Hence, the significant correlations expose two different subcultures: an active culture pertaining to Majority shareholders and a passive culture pertaining to Minority shareholders in Saudi Arabia. Moreover, the current legal environment guiding the CG procedures in Saudi Arabia was found to attach a low level of significance to minority shareholders in terms of: ease of litigation, establishment of specialised courts, appointment of competent qualified judges in CG commercial cases, and creation of awareness programmes for minority shareholders’ rights. In addition, the lack of a solid constitution was found to weaken popular pressure to safeguard shareholders' rights and promote a block-holding model of corporate control. Hence, due to governmental institutions falling short on their responsibilities, Saudi controlling families can practically be considered as an institution, as indicated by Institutional Theory, and this familial institution is likely to continue to manifest itself in the governance of emerging economic systems such as Saudi Arabia's as its survival is dependent on the institutional context.

Numerous value relevance investigations use the Ohlson (1995) model to empirically explore the value relevance of accounting variables such as earnings and goodwill amortisation by employing equity price as the dependent variable, but do not incorporate the most recent prior period’s equity price as an additional explanatory variable. The Ohlson (1995) model and the efficient market literature indicate that, since share prices represent the present value of future permanent earnings in an efficient market, the most recent prior period’s equity price should be a crucial variable for explaining the current price in value relevance models. This thesis therefore outlines how the Ohlson (1995) model incorporates the most recent prior period’s price as a potentially important value relevant explanatory variable, and reformulates the Ohlson (1995) model to demonstrate how the empirical specification of value relevance regression models can be greatly improved by including the most recent prior period’s price as an additional explanatory variable. We revisit the Jennings, LeClere, and Thompson (2001) empirical specification used to study whether goodwill amortisation is value relevant and potentially informative with respect to future earnings to illustrate the improvement to the Ohlson (1995) value relevance model empirical specification. When the model specification is improved by including the most recent prior period’s price as an additional explanatory variable, trailing earnings are shown, using time series, cross-sectional, and returns-based analysis, to be at best marginally value relevant when empirically explaining share prices in value relevance regression models. The thesis also indicates that goodwill amortisation should not be deducted from earnings in accounting statements because the presence of goodwill amortisation is significantly positively (not negatively) related to equity prices. This effect is eliminated when the most recent prior period’s price is included as an additional explanatory variable in the regression analysis, thus indicating that goodwill amortisation information as well as trailing earnings information have already been incorporated into the most recent prior period’s price. The thesis further indicates that value relevance studies that use the Ohlson (1995) model should use, for econometric reasons, change in price or else returns, not the price level, as the dependent variable. When returns are used to test the value relevance of goodwill amortisation, firms that report positive goodwill amortization actually have higher subsequent returns, a result that could possibly be due to the fact that growing firms tend to possess goodwill when they use acquisitions to expand. Results obtained when using returns to test whether goodwill amortisation is value relevant therefore extend the existing literature, since the prevailing expectation in the accounting literature is that goodwill amortization either represents a reduction in the value of goodwill over time or is not value relevant.

This thesis explores issues related to bank switching costs, in the context of the New Zealand banking market. Switching costs comprise the range of economic costs faced by customers changing bank, including monetary switching costs, the loss of the relationship with bank staff, and needing to learn new systems. An important effect of switching costs is customers become locked in to their bank, which has implications for market competition, and this raises questions about the need for a regulatory response. The study comprised a mail survey to 2983 people drawn from New Zealand electoral rolls, with a response rate of 34%. The survey instrument was a questionnaire of 70 questions in four sections: banking relationships, switching behaviour, switching costs, and demographic information. Nine categories of switching costs were used: Learning, Search, Monetary Loss, Benefit Loss, Personal Relationship, Brand Relationship, Service Disruption, Uncertainty, and Hassle. These categories are found to be appropriate. Furthermore, the three higher order categories of Procedural, Financial and Relational found by Burnham, Frels and Mahajan (2003) are confirmed. Although prior studies have recognised different switching costs, there has been limited work to understand whether they differ in their impact on attitudes and behaviour around switching. Different switching costs are found to have different effects. The study also examined whether the experience of switching matches the perception, and found switching is easier than expected. Furthermore, customers who have switched banks have different perceptions of switching costs to those who have not. Customers are different, and their attitudes and needs should therefore vary. Prior research has found differences in attitudes towards financial issues based on the family life cycle, but the relationship between switching costs and family life cycle has not been explored. This thesis finds perceptions of switching costs and switching behaviour vary significantly between life cycle groups, which appears in part to be related to associated changes in the complexity of the banking relationship. Four recommendations for regulators are generated from the results of the study. These include recommending greater acknowledgement of the existence and effect of switching costs, and investigation of bank account number portability.

The corporate governance best practice code (Code) of the New Zealand Exchange (NZX) came into effect on October 29, 2003. However, so far there is no systematic study of compliance with and impact of NZX Code on the performance of NZX companies. This study attempts to provide some answers to the perceived knowledge gap. The NZX Code recommends certain governance mechanisms to enhance corporate performance. The mechanisms analysed in this study are the percentage of independent directors, duality, presence of board subcommittees (audit, remuneration, and nomination), and the performance evaluation of board and individual directors. This thesis examines the possible relationship between recommended governance structures and the performance of NZX companies for the years 2003 (pre-Code) and 2007 (post Code), using data from the same 89 companies for each year. Although the number of companies adopting the NZX structures has increased, the rate of full compliance of the Code remains disappointingly low, rising from 5.6% in 2003 to just 22.5% in 2007. Probably due to the small sample size relative to the number of independent variables, and the problem of co-linearity, the multiple linear regression results do not seem to be conclusive and may be unreliable as the basis to form any formal statistical inference. However, treating the 89 companies as the whole population (89 out of 90), and using a simpler and more descriptive statistical tool to analyse the impact of individual independent variables on firm performance, the 2007 results show a consistent pattern of a positive relationship between Code compliance and firm performance, assuming all other factors being constant. This positive relationship is further reinforced by dividing the population into the various industry groupings as classified by the NZX, which also results in a consistent pattern of companies which comply fully with the Code structures financially outperforming companies that only partially comply with the Code during 2007. Surprisingly, listed companies adhering to the Chairman/CEO dual role do not seem to have impacted negatively on firm performance, contrary to agency theory expectation.

This research examines how the interval of observation affects the assessment of risk in stocks. I do this by analysing the economic and statistical significance of the worst returns on stocks, and by analysing the relationship between the interval of observation and factors which are thought to affect the return on stocks. This research shows the interval of observation used to assess the risk in stocks is important and the conclusions change considerably depending on how the data is drawn. In addition, the results indicate an investor’s time horizon is important in deciding their asset allocation and the style of investment should be suitable for the time horizon selected.

This thesis explores issues related to bank switching costs, in the context of the New Zealand banking market. Switching costs comprise the range of economic costs faced by customers changing bank, including monetary switching costs, the loss of the relationship with bank staff, and needing to learn new systems. An important effect of switching costs is customers become locked in to their bank, which has implications for market competition, and this raises questions about the need for a regulatory response. The study comprised a mail survey to 2983 people drawn from New Zealand electoral rolls, with a response rate of 34%. The survey instrument was a questionnaire of 70 questions in four sections: banking relationships, switching behaviour, switching costs, and demographic information. Nine categories of switching costs were used: Learning, Search, Monetary Loss, Benefit Loss, Personal Relationship, Brand Relationship, Service Disruption, Uncertainty, and Hassle. These categories are found to be appropriate. Furthermore, the three higher order categories of Procedural, Financial and Relational found by Burnham, Frels and Mahajan (2003) are confirmed. Although prior studies have recognised different switching costs, there has been limited work to understand whether they differ in their impact on attitudes and behaviour around switching. Different switching costs are found to have different effects. The study also examined whether the experience of switching matches the perception, and found switching is easier than expected. Furthermore, customers who have switched banks have different perceptions of switching costs to those who have not. Customers are different, and their attitudes and needs should therefore vary. Prior research has found differences in attitudes towards financial issues based on the family life cycle, but the relationship between switching costs and family life cycle has not been explored. This thesis finds perceptions of switching costs and switching behaviour vary significantly between life cycle groups, which appears in part to be related to associated changes in the complexity of the banking relationship. Four recommendations for regulators are generated from the results of the study. These include recommending greater acknowledgement of the existence and effect of switching costs, and investigation of bank account number portability.

With the intense competition and increasing globalization in the financial markets, bank management must develop customer-oriented strategies in order to compete successfully in the competitive retail banking environment. The longer a bank can retain a customer, the greater revenue and cost savings from that customer. However, customers are also more prone to changing their banking behaviour when they can purchase nearly identical financial products provided by the retail banks. In order to stay competitive, bank managers need to understand the factors that influence and determine consumer’s bank switching behaviour. With China's accession to the World Trade Organization (WTO), their financial services market was liberalized and deregulated. As a result, customers have a greater choice between domestic and foreign banks. Furthermore, the emergence of the internet allows customers to access financial products without limitation, and increases the Chinese retail banks’ ability to prevent customers’ switching banks. This study identifies and analyses the factors that influence bank customers’ switching behaviour in the Chinese retail banking industry. The findings reveal that Price, Reputation, Service Quality, Effective Advertising, Involuntary Switching, Distance, and Switching Costs have an impact on customers’ bank switching behaviour. The results also reveal that the Young Age and High Income Groups are more likely to switch banks. In general, the results of this research allow service marketers and practitioners to develop and implement services marketing strategies to decrease customer defection rates, and in turn, increase bank profits. Furthermore, this research provides useful information for future researchers who study switching-behaviour in the banking industry.

This thesis explores issues related to bank switching costs, in the context of the New Zealand banking market. Switching costs comprise the range of economic costs faced by customers changing bank, including monetary switching costs, the loss of the relationship with bank staff, and needing to learn new systems. An important effect of switching costs is customers become locked in to their bank, which has implications for market competition, and this raises questions about the need for a regulatory response. The study comprised a mail survey to 2983 people drawn from New Zealand electoral rolls, with a response rate of 34%. The survey instrument was a questionnaire of 70 questions in four sections: banking relationships, switching behaviour, switching costs, and demographic information. Nine categories of switching costs were used: Learning, Search, Monetary Loss, Benefit Loss, Personal Relationship, Brand Relationship, Service Disruption, Uncertainty, and Hassle. These categories are found to be appropriate. Furthermore, the three higher order categories of Procedural, Financial and Relational found by Burnham, Frels and Mahajan (2003) are confirmed. Although prior studies have recognised different switching costs, there has been limited work to understand whether they differ in their impact on attitudes and behaviour around switching. Different switching costs are found to have different effects. The study also examined whether the experience of switching matches the perception, and found switching is easier than expected. Furthermore, customers who have switched banks have different perceptions of switching costs to those who have not. Customers are different, and their attitudes and needs should therefore vary. Prior research has found differences in attitudes towards financial issues based on the family life cycle, but the relationship between switching costs and family life cycle has not been explored. This thesis finds perceptions of switching costs and switching behaviour vary significantly between life cycle groups, which appears in part to be related to associated changes in the complexity of the banking relationship. Four recommendations for regulators are generated from the results of the study. These include recommending greater acknowledgement of the existence and effect of switching costs, and investigation of bank account number portability.