This thesis aims to provide new behavioural finance insight into market anomalies through the use of a novel approach to measuring investor sentiment: the Facebook’s Gross National Happiness (GNH) index. The three empirical essays of this thesis investigate separately the relation between country-level investor mood – measured daily using the GNH index, and the following occurrences: the Monday Effect, return differentials in cross-listed shares; and herding. The empirical investigations are carried out with data (September 2007 to March 2012) for up to 20 international markets for which daily GNH data are available. In the first essay (Chapter 3), new empirical evidence is provided on the relation between mood and the Monday Effect. This chapter examines whether the well-documented evidence of Monday returns being significantly lower than other trading days of the week relates with mood. The results indicate that the Monday Effect become insignificant when mood is controlled for, and that such effect is more prominent within small capitalization indices and within collectivist and high uncertainty avoidance countries. These findings thus provide empirical support to a behavioural explanation for the Monday Effect, particularly the ‘Blue Monday’ hypothesis. The second essay (Chapter 4) investigates whether returns differentials in pairs of cross-listed shares is related to mood differential between the markets on which these securities are traded. The results, based on 281 pairs of synchronously traded cross-listed shares and controlling for arbitrage costs, support the hypothesized positive relation between return and mood differentials. Such relation is also found to be more prominent among small-cap firms, as these shares tend to attract small investors who are prone to sentiment-induced biases. The third essay (Chapter 5) adds to limited existing empirical evidence on the relation between investor mood and herding behaviour. This chapter investigates whether investors exhibit greater tendency to herd during days of extreme (upper or lower) moods, and whether such relation is affected by firm-size and culture. The results indicate the presence of herding during days with extreme mood, thus lending further empirical support to the notion that herding is mainly driven by psychological factors. Consistent with prior literature, the relation between herding and mood is found to be stronger within small capitalization indices and in countries with collectivist and high uncertainty avoidance culture. Overall, this thesis contributes to further understanding of the effect of investors’ psychological biases on the market.

The thesis empirically investigates and compares some of the main aspects of Islamic and conventional banks during four periods: the pre-financial crisis, financial crisis, post-financial crisis and entire sample periods (2002-2015). Specifically, it investigates and compares the information asymmetry, credit risk and profitability in Islamic and conventional banks. For the information asymmetry investigation, a total sample of 211 Islamic and conventional publicly listed banks from Asia, Europe and Africa is used over the period 2002-2015. Quarterly data is retrieved from Datastream for the sample. However, for credit risk and profitability investigations, annual data for 225 Islamic and conventional banks are extracted from Datastream for the periods from 2002 to 2015 from Asia, Europe and Africa. The study aims to: (i) investigate and compare the degree of information asymmetry in Islamic and conventional banks for the pre-financial crisis, crisis, post-crisis and full sample periods; (ii) investigate and compare the degree of credit risk in Islamic and conventional banks for the pre-financial crisis, crisis, post-crisis and full sample periods; and (iii) investigate and compare the degree of profitability in Islamic and conventional banks for the pre-financial crisis, crisis, post-crisis and full sample periods. The empirical investigations provide important results in the three areas. First, the results show a significant difference in the information asymmetry level between Islamic and conventional banks for the crisis, post-crisis, and full sample periods. In fact, Islamic banks showed significantly lower information asymmetry levels than their counterparts in all information asymmetry proxy measures (i.e. Bid-Ask Spread, Share Turnover ratio and Stock Price Synchronicity SYNCH). These findings are robust with the intangibility ratio as a proxy of information asymmetry for all four periods (including the pre-crisis period). To the best of the author’s knowledge, such results are presented for the first time, and will add to the Islamic banking literature. Second, mixed results were found for the credit risk levels in Islamic and conventional banking credit risk for the four periods when Z-score and non-performing loans are used as credit risk proxy measures. However, the robustness check shows that there are no significant differences between Islamic and conventional banks in their credit risk for all of the different periods used in the study. This suggests that despite the different nature of both banks, their credit risk for the study periods do not statistically differ. These results contradict some prior studies conducted in the same area. Nevertheless, using only publicly listed banks, this thesis covers a longer period than other studies and investigates credit risk in four periods while using a combination of different control variables. Third, the results show that the profitability of Islamic banks is lower than conventional banks for the crisis, post-crisis and full sample period when using return-on-asset and return-on-equity as profitability measures. However, there are no significant differences between Islamic and conventional banks’ profitability during the pre-crisis period. These results are robust. Nevertheless, they affirm some prior studies’ findings and contradict others. This thesis uses up-to-date data for a longer period and investigates the profitability of publicly listed Islamic and conventional banks four different periods. Its findings add to the Islamic banking literature.

This thesis empirically analyses corporate governance reforms in Saudi Arabia using a mixed-methods research design. Saudi Arabia has recently pursued corporate governance reforms; the establishment of the Capital Market Authority (CMA) in 2003 and the publication of the Saudi Corporate Governance Code (SCGC) in 2006 constitute a central part of these reforms. This study attempts to provide new insights by exploring the corporate governance reforms pursued. In particular, by using an integrated research design framework, the study seeks to: (i) examine the level of compliance with, and disclosure of, the governance provisions contained in the SCGC by Saudi listed firms; (ii) ascertain whether the introduction of the SCGC has helped improve corporate governance standards in the Saudi corporate context; (iii) investigate the factors affecting voluntary corporate governance disclosure among Saudi listed firms; (iv) examine the association between a number of individual corporate governance mechanisms (i.e., equilibrium-variable model) and financial performance in Saudi listed firms; (v) analyse the relationship between voluntary compliance with the SCGC and firm financial performance by employing a broad composite corporate governance index (i.e., compliance-index model); and (vi) explore the level of awareness and appreciation of good corporate governance practices among key internal and external stakeholders in Saudi Arabia. The first five objectives outlined above are examined using a quantitative methodology, whereas the sixth objective is investigated by employing a qualitative research design. Efforts have been made to achieve integration between the two different research designs by applying the Explanatory Sequential Design (two sequential stages) proposed by Creswell and Clark (2011) within a multi-theoretical framework that incorporates insights from agency, managerial signalling, stakeholder, stewardship and resource dependence theories. The decision to employ a mixed-methods research design is motivated by the relative lack of, and recent calls for, mixed-methods approaches in corporate governance research. The mixed-methods approach seeks to provide a more complete understanding of the effects of corporate governance reforms on corporate disclosure and performance. In addition to the quantitative analysis, semi-structured interviews were conducted with five different groups of key stakeholders. The interview data offers further scope to: (ii) explore the corporate governance reforms; (ii) examine the impact of such reforms on actual governance practices; and (iii) provide a unique opportunity to further understand and explain the quantitative findings. Through the quantitative approach, the study examined balanced panel data of 80 Saudi listed firms from 2004 to 2010. This generated a total of 560 firm-year observations that were collected manually from the sampled firms’ annual reports. First, the constructed Saudi Corporate Governance Index (SCGI) showed that the introduction of the SCGC has helped improve voluntary corporate governance disclosure among Saudi listed firms. Second, this study found that board size, audit firm size, the presence of a corporate governance committee, government ownership, institutional ownership and director ownership have a positive influence on the level of compliance with the SCGC. In contrast, the analysis showed that the proportion of independent directors and block ownership are negatively correlated with the level of voluntary corporate governance disclosure. Third, the findings obtained from the compliance-index model suggest that good corporate governance practices, proxied by the SCGI, are positively related to return on assets (ROA), but have no significant relationship with firm value, as measured by Tobin’s Q (Q-ratio). Similarly, the results from the equilibrium-variable model are by and large mixed. Whereas CEO duality, proportion of independent directors, board sub-committees and director ownership are positively related to ROA, board size is negatively associated with ROA. On the other hand, the proportion of independent directors, board size, frequency of board meetings and director ownership are positively related to firm value, while CEO duality and the presence of board sub-committees have no significant relationship with firm value. The results from the quantitative analysis are robust to controlling for a number of potential endogeneity problems. Finally, the findings obtained from the interview data generally suggest that the regulatory authorities and the CMA in particular need to further strengthen efforts to enhance the level of awareness and appreciation of good corporate governance practices among key internal and external stakeholders of corporate governance in Saudi Arabia.

This study explores the value creation in relationship banking from the relationship managers' perspective. A grounded theory approach (Strauss and Corbin, 1998) is adopted that theory is derived from data, systematically gathered and analyzed throughout the research process. This study derives concepts and categories from primary data and identifies relationships among these theoretical elements. This study provides a comprehensive picture of relationship banking as a social phenomenon, and supplies some theoretical and managerial implications. Moreover, this study links the literature relevant to relationship banking from different disciplines. This is a new way of looking at the relationship banking phenomenon and relevant literature in an integrated manner. This study conducted research to investigate why the case banks establish long-term relationships with corporate customers? The case banks considered macro conditions including the advances in technology, financial deregulation, and business globalisation when they adopted relationship banking. The interviewees perceived that relationship banking was efficient for managing risk, effective for saving cost and necessary for cross-selling. Some intervening conditions including customer information and knowledge, customer needs and customer confidence also influence the development of relationship banking. This study investigated how the case banks establish and maintain these relationships and how they organise and motivate relationship managers? The case banks built a relationship orientated corporate culture, organised employees around customer relationships and employed customervalue based performance measurement and incentive-based reward system. The employees cooperated inside the organisation and communicated with their customers regularly, exchanged information and provided relationship transactions. This study also investigated how the case banks and corporate customers get benefits from relationship banking? The interviewees perceived that the corporate customers gained benefits including fund availability, product availability, service quality, in-time heir, and business platform. The case banks gained benefits including reduction of credit risk, increase in income, sustainable profit, customer satisfaction, employee satisfaction. The findings were integrated and linked to some banking, finance, organisation and marketing literature related to relationship banking phenomenon. The case banks increased internal service quality through employee relationship management and improved employee satisfaction. The interviewees perceived that the corporate customers received benefits in the corporate banking market by customer relationship management. The increased customer satisfaction resulted in customer retention and profit to the case banks. The case banks perceived that added shareholder wealth improved shareholder satisfaction. This study concluded that the case banks, which had more relationship banking competitive advantages and better relationship banking, related processing systems were expected to outperform the competing banks.

Microfinance Institutions (MFIs) play important roles in socio-economic development and poverty alleviation particularly in developing countries. It has however been argued that the focus of MFIs is changing from the traditional purely social to commercial (mission drift) and has been criticised for neglecting the welfare of citizens and grassroots accountability in favour of commercialisation and accountability to donors/shareholders. This mission drift has resulted in changes in the structure and practices of MFIs. The study has been designed to examine how the accounting and accountability practices of a MFI can change in response to changes in its mission. The study presents case evidence from a large MFI operating in Cameroon with data collected through semi-structured interviews, informal discussions and documents. The study traces the evolution of the organisation and its accounting and accountability practices. A theoretical framework of an interpretive nature is used which draws on institutional entrepreneurship theory in order to highlight the importance of actors in the change process. The findings suggest a mission drift and transformations over the years from a social to a commercial organisation with the change impacting significantly on its structure and accounting and accountability practices.

This thesis examines the strategy formulation of small and medium enterprises in Greece by measuring the two principal dimensions of the strategy formulation process, the normative/descriptive dimension and the individual/collective dimension. For the purposes of the thesis a theoretical model of strategy formulation is proposed and evaluated, drawing upon the principles of contingency theory which presumes that there is no exclusive approach to strategy formulation which applies likewise to all firms in all circumstances. According to contingency theory there are many variables or factors which predict and influence the decision of formulating a strategy. Furthermore, the thesis investigates the role of accounting information on the process of strategy formulation by examining the relationship between the adoption of a specific strategy formulation approach and the information sources that SMEs use, the extensiveness of accounting information usage and the perceived usefulness of accounting information to SME managers. Using a data-triangulation (semi-structured interviews and a questionnaire), the findings of the study show the following: First, organizational size, perceived environmental volatility, the level of technology and specific owner manager characteristics (experience and education) are all significant predictors of SMEs adoption of a specific strategy formulation approach. Second, accounting information usage is positively associated with the normative and collective strategy formulation approaches. More specific, SMEs which utilize a broad range of information sources, which engage in extensive accounting information utilization and which perceive accounting information as very useful are positively correlated with the normative and collective approaches of strategy formulation. Third, financial performance was found to have a positive relationship with the descriptive and individualistic approach to strategy, meaning that SME owner managers who employ emergent strategies without the collaboration and participation of others in the process tend to achieve higher levels of profitability. Fourth, significant differences were found between SMEs having a different ownership status (family and non-family SMEs) and belonging to different business sectors (retail, construction and service providing firms) in relation to strategy formulation approach.

This thesis investigates the factors that influence the magnitude of goodwill impairment losses as well as the value relevance of these losses using a sample of 2,466 companies, drawn from 17 countries in which IFRSs have been made mandatory for all their domestic listed companies. The study period is 2007-2013 and includes 14,898 firm-year observations. The results obtained from the Tobit regression analysis involving variables drawn from agency/positive accounting theory, Hofstede’s theory of culture, as well as different theoretical institutional models, reveal that goodwill-impairment amounts are not only driven by economic factors and managerial reporting incentives, but also by country-specific factors, such as cultural and institutional variables. The results also confirm that the strength of the equity market is still the single most influential factor contributing not only to differences in accounting practices but above all, to differences in institutional quality between countries. The results of a K-means cluster analysis reveal that there are two groups of countries, corresponding to strong equity-outsider and weaker equity-outsider clusters. By comparing the relative associations between goodwill-impairment amounts and economic factors and managerial reporting incentives across these two institutional clusters, estimation results reveal that firms in the strong equity-outsider cluster have recorded goodwill-impairment losses that are, on the one hand, strongly associated with economic factors, and on the other hand, weakly associated with managerial reporting incentives. Further analysis also showed that while results for the pooled sample did not indicate that goodwill impairment losses were value relevant this was not the case for firms in the strong equity-outsider cluster, which have recorded impairment losses that are, on average, more relevant and more timely than those recorded by firms in the weaker equity-outsider cluster.

This thesis is structured upon three studies. The first study investigates whether mandatory IFRS adoption improves accounting quality in Latin America. The findings show that in the post-adoption period: accrual earnings management practices are reduced, value relevance of accounting increases, and the delay in recognising bad news reduces. However, these improvements cannot be found in firms with high bankruptcy possibility and poorly performing firms. The second study focuses on whether the analysts’ information environment has improved since the IFRS adoption. The results show that the mandatory adoption of IFRS improves analysts’ information environment, even after controlling for the firm-level reporting incentives. The third study focuses on whether IFRS has affected the cost of equity and debt in Latin America. The findings show that the cost of equity and debt decreased significantly in the post-IFRS period. Overall, the results found can be attributed to IFRS as the institutional environment has not changed significantly around the years of the mandatory adoption of IFRS. Thus, IFRS can contribute to enhance the accounting quality of Latin American firms, and may help to develop the capital market and the development of these firms.

The thesis contributes to the literature in the following ways: First it contributes to the body of literature by extending our knowledge on the predictive ability of alternative Unconditional methodologies. Second it adds to the body of litareture by providing practical tests so as to assess the performance of Conditional models. Third the thesis extends our knowledge on the sensitivity of utilising different portfolio formation criteria, while testing both Unconditional and Conditional asset pricing inferences. Fourth it contributes to the body of literature by extending our knowledge on Unconditional and Conditional beta models and their comparative performance. Fifth the thesis adds to the existing literature by estimating the Industry cost of capital, using the following different models, Unconditional, Conditional, the Arbitrage Pricing Model and the Capital Asset Pricing model. Thus provides empirical evidence using a practical application, estimation of the Industry cost of capital, of which model provides a better description of UK returns. Chapter 4 introduces the portfolio returns used in the thesis and examines the size, price earnings ratio, dividend yield effect and their interactions. The time-series of the primary portfolios start in 1956 and ends in 1996. We find that for the 1976-1996 period, that the dividend yield and PE effect subsume the size effect. However the PE effect subsumes the dividend yield effect and it is the PE effect that is the most dominant. The best documented of all stock market effects, the small-firm premium went into reverse during 1989-1996. The size effect lives on, but for the latest decade, it is the largest firms that outperform the smallest ones by 10.26% per annum. Chapter 5, which examines Unconditional models, aims to examine the predictive ability of alternative Unconditional methodologies. Another objective that is explored is the sensitivity of results to different grouping techniques, of size; PE ratio and dividend yield portfolio groupings. The third issue examined entails the identification of priced factors in the UK market, over a twenty year of period, (1976-1996), and for a data-set (approximately 6000 companies), which provides a complete history of firms traded on the London Stock exchange, inclusive of Unlisted securities market. We find that that the choice of one methodology over another has important implications and that there is a sensitivity of results to different portfolio groupings. Chapter 6, which examines Conditional models, i. e., conditioned on a set of instrumental variables, models the dynamic behaviour of portfolio returns using a Conditional Asset Pricing Model and examine the behaviour of macroeconomic risk premiums over time. We provide practical tests of Conditional Asset Pricing Models and forecast (i) the sign of the price of risk using the probit model, (ii) the magnitude of the price of risk and (iii) portfolio returns for the size, PE ratio and dividend yield portfolios. We find that the instrumental variables show ability to predict variation of the price of risk of the return on FTSE, S&P 500, unexpected UK stock exchange turnover, change in money supply, imports, inflation and portfolio returns. Chapter 7 compares first Unconditional (constant) and Conditional (time-varying & conditioned on a set of instrumental variables) beta models and second the CAPM and the APM, estimates the industry cost of capital. We find differences, between constant unconditional betas and conditional betas cost of capital. The average Mean Square Error (MSE) for the conditional betas are smaller compared to constant betas. Moreover we find that the CAPM has larger MSE not only compared to the APT model with conditional betas, but with APT with unconditional betas. The Conditional beta model provides the best description of UK returns. We also run Monte Carlo simulations and test the statistical significance of the errors of the Conditional beta model. We find the errors to be statistically insignificant.

The prohibition of insurance as specified in the conventional business model has led to Takaful being established for the Muslim community to fulfil their accountability/obligations towards Allah. The absent of a contract in Takaful, a replacement of the conventional sale contract in insurance has resulted in the emergence of Muamalah contracts as a basis for contractual structures and this bear the minimum acceptable requirement of Shariah. The attainability of such contractual structures to be used in Takaful had been unstable in the sense that it needs various reviews, and this has occurred precisely because it has been laden with both Shariah compliance and operational issues detaching the contracts from its original Shariah and economic substances. This research explores how the governance of Takaful in Brunei considered and adapted unstable contractual structure for Takaful operation inciting the divergence from the fundamental principles of Shariah. The main objective of the research is to explore the governance of Takaful in Brunei. The research seeks to identify and analyse the factors that influence the adaption of the Takaful contractual structure, examine the logics behind the current governance framework, and investigate the disclosure of information and financial reporting of Takaful. It utilizes the interpretive approach and this is supported by qualitative research methods in the form of interviews, participant observation and document review. The thesis also uncovers the causal factors of the necessity to adapt unstable contractual structure, and this in turn raises the concern of how Takaful is governed. In this work neo institutional theory of institutional isomorphism is used to identify these factors and the manner in which they influence the adaption process. In addition, the logical reference exhilarating the governance framework of Takaful is examined through the lens of institutional logic theory to understand why it has not been possible to alleviate concerns surrounding the adaption of the contractual structure. The analysis also extends to unravel the core logics of governance driving Takaful disclosure and financial reporting. Empirical findings show that the Brunei government has been the main driving factor in terms of adapting the current contractual structure during the initial creation of Takaful in Brunei. Ironically conventional insurance has been used to define the boundaries for structuring the contractual model for Takaful to replace conventional insurance model. Other factors at the macro (e.g. government influence), meso (e.g. the industry) and micro (e.g. between the companies and within each company) levels have also influenced the current contractual structure through the main three forces: coercive (e.g. government enforcement), normative (e.g. Legal Framework) and mimetic (e.g. following other Takaful operators). Decoupling the substance of the contract and actually implementing it is masked by the Shariah governance responsible for approving the individual contracts without evaluating the whole business structure from the Shariah perspective. The business and Shariah logics are the main dominance of Takaful governance frame of reference. Separation between these two logics served as sustainable force for its ability to reflect the compliance status desired by the industry. This creates trust in governance and an environment of adhering to Shariah in good faith. Disclosure and financial reporting decisions are driven by the regulatory, market and Shariah logics, where the regulatory logic dominates the mandatory disclosures. Finally, in evaluating these factors that influence the governance of Takaful in Brunei the thesis offers options of how to improve the contractual structure and addressing concerns thereof.