This thesis consists of three separate chapters that explore issues at the intersection of taxation and financial accounting. The unifying theme is corporate tax avoidance and the consequences of increased transparency of tax practices on firm behaviour and financial reporting. Chapter 1 (co-authored with Chris Evans and Youngdeok Lim) examines the impact of changes to a full dividend imputation system on corporate tax avoidance. We exploit an exogenous shock to the Australian dividend imputation system which became effective on 1 July 2000 and allows shareholders to claim all imputation credits attached to dividends, even if it propels them into a tax refund position. This enhancement to shareholder’s after-tax positions likely provides stronger incentives for firms to minimise tax avoidance activities to generate valuable imputation credits for distribution to shareholders. We implement a difference-in-differences research design to examine the impact of the legislative change on tax avoidance for a variety of treatment and control groups after the change. Consistent with our expectations, we find evidence of an increase in cash effective tax rates (decrease in tax avoidance) for domestic dividend-paying firms relative to domestic non-dividend-paying firms. This finding is even more pronounced for firms paying fully-franked dividends, and the decreases in tax avoidance are economically significant. Our results are consistent with the notion that firms undertake less tax avoidance in the post 1 July 2000 period given the presence of stronger incentives for them to pay corporate tax. In Chapter 2 (solo-authored), I exploit the availability of new data to examine the impact of mandatory public country-by-country disclosures on the tax aggressiveness of European Union (EU) banks. In response to growing public and political backlash against tax avoidance, the European Parliament introduced new rules in 2013 requiring the public disclosure, on a country-by-country basis, of certain tax-related information by credit and investment firms operating in the EU. Enhanced transparency via public country-by-country-reporting (CBCR) allows greater scrutiny by stakeholders and is considered one way of increasing pressure on EU banks to pay corporate taxes that reflect their true economic presence in each country they operate in. I conduct a range of empirical tests using cash and book effective tax rates to proxy for tax avoidance and based on a hand-collected sample of 72 banks, I do not find any evidence of a reduction in tax avoidance in response to increased transparency. A similar result is found when a differences-in-differences research design is employed to test for any change in tax avoidance of EU banks relative to a control group of 39 multinational EU insurers exempt from CBCR rules. In fact, in some tests, I find that, on average, EU banks increased their tax avoidance relative to EU insurers despite increased disclosure levels. I also find that tax haven use, calculated as the proportion of turnover, profit before tax, and subsidiaries/branches disclosed in tax havens, remains largely unchanged despite increased transparency. The results suggest that mandatory public CBCR has not altered the cost-benefit equilibrium of tax avoidance sufficiently to encourage EU banks to curtail their tax avoidance practices. Chapter 3 (co-authored with Bjorn Jorgensen and Peter Pope) investigates the interplay between mandatory public CBCR, geographic segment reporting, and tax haven use. We examine whether the availability of country-level financial information impacts geographic segment reporting and the extent to which firms aggregate geographic segments. Based on a hand-collected sample of 70 banks operating in the EU, we document the location of their operations and the extent to which they operate in tax havens. We find that, on average, banks with tax haven operations enjoy significantly higher profit margins, turnover per employee, and profit per employee, and lower book effective tax rates, in these jurisdictions relative to non-tax havens. Using a difference-in-differences research design, we find no significant change in the number of geographic segments, country segments, or line items per geographic segment, disclosed in segment reporting notes after the introduction of CBCR relative to a control sample of 39 multinational EU insurers exempt from CBCR. Furthermore, we find a positive association between tax haven intensity and geographic segment aggregation consistent with the notion that EU banks may aggregate geographic segments to obfuscate tax haven activities. This early empirical evidence suggests that mandatory public CBCR has limited impact on geographic segment reporting. In sum, the three chapters of this thesis contribute to the emerging literature on the determinants and consequences of corporate tax avoidance. The findings should inform global regulators and policy makers interested in the extent of corporate tax avoidance and especially, EU policy makers currently considering the extension of public CBCR to all industries.

This thesis explores how working-age social security money in the UK is understood and used from the perspective of its recipients, using an approach that emphasises the ‘social meaning’ of money. The thesis is motivated by two initial observations. On the one hand, politicians and policymakers have demonstrated an awareness that social security money has the capacity to carry and communicate social meaning. Yet, on the other hand, the mostly individualistic, asocial, perspectives of neoclassical and (more recently) behavioural economics, have continued to dominate the way in which social security policy has been framed. Against this background, the main argument of the thesis is that both academics and policymakers have so far underestimated the social aspects of social security money on a micro level, within the lives of its recipients. A novel alternative perspective is proposed, drawing on insights from new economic sociology, that theorises social security money as constituted by social context, social relations, and social meanings. This theoretical perspective is explored empirically using in-depth, semi-structured interviews with 43 working-age social security recipients living in East London. The interviews are analysed using a form of thematic analysis. The empirical findings are presented in three main sections that address the participants’ experiences of claiming, organising, and spending social security money. Based on these empirical findings, the thesis argues that four key concepts can help to clarify how working-age social security money is understood and used from the perspective of its recipients. These are: supplication and earned entitlement; control and responsibility; dependence and independence; and administratively-defined need. The thesis concludes by showing the implications of these key concepts for how policymakers approach the design of social security payments specifically, and how they might better understand recipients’ experiences of social security policy more generally.

This thesis consists of three chapters that belong to the realm of household finance and banking. The first essay develops a structural model of mortgage demand and lender competition to study how leverage regulation a affects the equilibrium in the UK mortgage market. Using variation in risk-weighted capital requirements across lenders and across mortgages with differential loan-to-values, I show that a one-percentagepoint increase in risk-weighted capital requirements increases the interest rate by 10 percent for the average mortgage product. The estimated model implies that heterogeneous leverage regulation increases the concentration of mortgage originations, as large lenders exploit a regulatory cost advantage. Counterfactual analyses uncover potential unintended consequences of policies regulating household leverage, since banning the highest loan-to-value mortgages may reduce large lenders’ equity buyers, thereby affecting risk. The second essay, co-authored with Davide Fantino, exploits an allocation rule by the ECB for Targeted Long-Term Refinancing Operations on banks’ borrowing limit as an instrument to identify the effects of an expansion in banks’ funding availability on the cost of credit. Using transaction-level data from the Italian credit register and a difference-in-difference identification strategy, we show that treated banks decrease loan rates to the same firm by approximately 20 basis points relative to control banks. We then study how the effects of the liquidity injection vary with competition in the banking sector, exploiting the local nature of bank-firm lending relationships and exogenous variation from the historical development of Italian cities during the Renaissance. Our results suggest that banks’ market power can significantly impair the effectiveness of unconventional monetary policy, especially for safer and smaller firms. The third essay, co-authored with Philippe Bracke and Nic Garbarino, presents new evidence that lenders use down payment size to price unobservable borrower risk. We exploit the contractual features of a UK scheme that helps home buyers top up their down payments with equity loans. A 20 percentage point smaller down payment is associated with a 22 basis point higher interest rate at origination, and a higher ex-post default rate. Lenders see down payment as a signal for unobservable borrower risk, but the relative importance of this signal is limited, as it accounts for only 10% of the difference in interest rates between standard mortgages with 5% relative to 25% down payment.

Behavioural finance has been popular in the literature pertaining to investment behaviour in recent years. However, the number of applications for exploring individual investment behaviour in Hong Kong and mainland China are limited. This research investigates investor behaviour to identify the major determining factors influencing investor behaviour between Hong Kong and mainland China, and derive customers' investment preferences from the behavioural patterns identified. The approach developed generates two new models, namely PSYC Model and Financial Data Mining Model (FDMM). Data from 142,496 mainland Chinese and Hong Kong investors of Convoy Financial Service Limited ("Convoy"), one of the largest financial service providers in Hong Kong, were used to identify major influencing factors and examine differences of mainland Chinese and Hong Kong investors. Statistical analyses, including descriptive analysis, factor analysis, correlation analysis and regression analysis, were adopted. Six major factors were statistically supported to have impact on investment behaviours. More importantly, investment decisions made by investors from mainland China and Hong Kong are mainly affected by (i) age (demographic factor) (ii) investment experience (psychological factor) and (iii) annual income (sociological factor). The newly developed PSYC Model on the basis of the statistical results generalized two major perspectives of investor behaviours, namely investing involvement and risk appetite, in response to the three factors of Hong Kong and mainland China investors. Following this, the FDMM was created to assist financial institutions in predicting customer behaviour. Clustering analysis and association rules were applied. Ten experts with at least 15 years of experience in banking, insurance and stock markets in Hong Kong and mainland China were consulted in form of group meetings, telephone interviews and teleconference to justify the two new models with their experience and practical knowledge in the industry. The PSYC Model and FDMM were implemented within Convoy for validation. The former model helped in design and identification of appropriate product and marketing strategies for different classes of products while the latter model generated eight specific rules for Convoy to implement product offerings to Hong Kong investors which greatly improved business workflow and efficiency. As a result, the success rate selling financial products to its customers and the customer satisfaction level were boosted by 66% and 8.7% respectively. With these promising results, the research objectives were met, and the outcomes of this research can assist financial institutions to gain better insights into the behaviour of their customers from Hong Kong and mainland Chinese, and offer the most suitable financial products for fulfilment. The model developed could be further generalized for adoption by other financial institutions after further evaluation and case studies with the support of a wider range of customer profiles in diversified financial institutions.

Liquidity has a potential impact on the investment strategies and financing strategies which can affect or be affected by the risk perspective. The thesis aims to establish linkage between liquidity and three risk-related issues in the finance literature. First, we inspect the impact of market liquidity on feedback trading. Our results suggest that the market liquidity should be included in the feedback traders’ demand function for shares in East Asian stock markets. We then analyse the listed US firms to test the impact financial flexibility on firm’s corporate social responsibility. We find a negative relationship between financial flexibility and CSR, which indicates that the two are substitutes to each other in hedging financing risk. Furthermore, we find the negative relationship between financial flexibility and CSR is affected by both CEO conservatism and the lifecycle stage of a firm. Finally, we investigate the impact of CEO inside debt compensation on the adjustment speed of cash holding of the listed US firms. We find that the CEOs with high inside debt compensation accelerate the adjustment of cash holding when the actual cash ratio is below target while decelerating the adjustment speed of cash holding when there is excess cash.

This thesis first investigates the asset pricing ability of a new risk factor, namely Risk-Neutral Skewness (estimated based on option data) in the global commodity futures market. Skewness trading behaviour in the option market is attributed to heterogeneous belief and selective hedging concern. The negative (positive) the Risk-Neutral Skewness is accompanied with excess trading on put (call) option contracts, which leads to underlings' over-pricing (under-pricing). Above results are robust to time-series and cross-sectional test and other alternatives. Secondly, a new functional mean change detection procedure is proposed via the Kolmogorov-Smirnov functional form. Simulations indicate decent testing power under the alternative. An empirical test procedure is deployed for crude oil and gold futures price term structure, showing real market data change. The multivariate forecasting regression analysis uncovers trading behaviours behind the real-world change occurrence. Lastly, the futures basis term structure is forecasted under the framework of the functional autoregressive predictive factor model with lag 1. By comparison, the new method outperforms other functional and non-functional methods, with maturities less than 10 months. The Model Confidence Set method statistically validate this result. A new variance minimization trading strategy is proposed and tested when the future futures basis is forecast and known.

This thesis is a collection of three contributions to sensitivity analysis of financial and insurance risk evaluations. Sensitivity analysis constitutes an important component of model building, interpretation and validation, particularly for models whose output is at the core of a risk management decision process. We study models comprising a (random) vector of input factors, an aggregation function mapping input factors to a random output, and a risk measure applied to the output. In most typical insurance and financial applications, the model's characteristic - a non-analytical and numerically expensive aggregation function evaluated on numerous input factors - renders most sensitivity analysis methodologies unfeasible. We develop sensitivity analysis procedures applicable specifically for the above model setting. First, we address the estimation of risk measures applied to the model output. The fundamental purpose of a risk measure is to distinguish between different risk profiles. However, strong assumptions on the risk measure's ability to distinguish risk severities lead to non robust estimators. We provide conditions when risk measures exhibit both, robustness and a consistent ranking of risks. Second, we develop a framework termed reverse sensitivity testing, that associates a critical increase in the risk measure to specific input factors. We provide analytical solutions of the stressed distribution of input factors that lead to the required increase in the outputs' risk measure. Third, we introduce a novel sensitivity measure, which quantifies the extent to which the model output is affected by a stress in an individual input factor. Compared to other sensitivity measures in the literature, the proposed measure incorporates the direct impact of the stressed input as well as indirect effects via other input factors that are dependent on the one being stressed. In this way the dependence between inputs is explicitly taken into account.

This doctoral thesis investigates the incentives that affect the decisions of firms to undertake R&D investment and examining the impact of financial constraints on the levels of R&D expenditure of AIM-listed firms in the UK. The thesis comprises six chapters. The first chapter provides an introduction to the research, followed by an overview of the Alternative Investment Market in Chapter 2. Chapter 3 investigates the incentives that influence a firm’s decision to carry out R&D investment. The key empirical findings from a dynamic logistic regression suggest that large sized firms are better at generating innovative activities, that young firms tend to be more likely to innovate, that competitive markets are better at stimulating innovative activities, and that corporate income tax rates have a positive impact on this probability. Chapter 4 explores the impact of financing constraints on the levels of R&D expenditure. Using a system GMM estimator, the empirical findings suggest that working capital buffers R&D levels from transitory financial shocks, thus avoiding the high adjustments costs associated with any change in levels of R&D investment. Chapter 5 investigates the impact of the proceeds from the disposal of fixed assets on R&D expenditure. In contrast to prior literature, the main findings of this chapter suggest that there is a negative association between R&D expenditure and the cash raised from voluntary asset sales, indicating severe binding financing constraints. Practical implementations, promising ideas for future research, and the main findings of this research are summarized in the concluding chapter of the thesis.

First, we document the co-existence of the time series momentum and of the term structure factors in the global commodity futures market. We demonstrate that the strategies based on the joint time series momentum and term structure trading signal outperform time series momentum only strategies and term structure only strategies. Second, we propose a Multivariate Volatility Regulated Kelly strategy, which imposes extra variance penalization compared to the Kelly criterion. We furthermore demonstrate the superiority of our method in relatively low correlated portfolios, relative to the fractional Kelly and full Kelly strategies. The simulation results and Chinese commodity future empirical results strongly support our method. Third, we combine the shrinkage theory and CUSUM change point detection in order to improve the covariance estimators. The change point embedded covariance estimator can pe1jorm better than any shrinking covariance estimators in the portfolio management. We empirically test different shrinkage estimators based portfolios in global futures markets.

This thesis consists of three empirical essays on certain aspects of the behaviour of the stock market. The first study measures the impact of political reform on stock market volatility in Southeast Asian countries using a GARCH-family of model. We find that these major political changes have positive impact on the stability of the stock market. The second study employs an Autoregressive Distributed Lag model and Toda-Yamamoto (1995) Granger causality test to assess the interaction between Thailand's stock market and macroeconomic variables. We find long-run and short-run interactions exists between the stock market index and macro variables. The third study provides another look at the volatility of the stock exchange through variance decomposition. With a short-length dataset from Thailand, we find that discount rate news and cash flow news are equally important.