Multiple solutions often exist in both non-cooperative and cooperative games. In this thesis we use game theoretical arguments and experiments to examine multiplicity in two different areas, namely uniform price auctions and weighted voting games. In the second chapter we develop a theoretical model of IPO auctions and show that when demand is discrete the tacit collusion equilibrium is obtained under a stricter condition than in the continuous format. There also exists a continuum of equilibria where investors with a higher expected valuation bid more aggressively, and as a result the market price increases with market value. The tacit collusion equilibrium is in fact an extreme case of this set. Bertrand competition, i.e, submitting a flat demand function, does not form an equilibrium in this game. We then test our equilibrium predictions and compare the performances of uniform price auctions with fixed price offerings using laboratory experiments. In the uniform treatment, there is no evidence that the tacit collusion equilibrium has been achieved. On the contrary, subjects with higher expected value bid more aggressively. Their behaviour is close to an equilibrium derived where all players participate. The resulting market prices are significantly higher than the market value of an investor with a low value signal. As a consequence, in our experiment uniform price auctions are superior to fixed price offerings in terms of revenue raising. In chapter four we move to weighted voting games. Power indices predict that enlargement of the voting body may affect the balance of power between the original members even if their number of votes and the decision rule remain constant. Some of the existing voters may actually gain, a phenomenon known as the paradox of new members. We test for this effect using laboratory experiments. We find empirical support for the paradox of new members. Our results also allow an assessment of the predictive performance of standard power indices.

Many national and international instruments have been concerned with building an effective procurement system. In this context, particular procurement issues, such as the implementation of secondary policies, the review mechanism to address complaints, provisions on electronic procurement or rules governing privately financed projects, have received an in-depth examination. However, the particular analysis of those issues in the context of World Bank-funded procurement has been given almost no attention in the literature. Discussing such issues in the context of World Bank procurement involves special consideration because of the status and character of the organisation and the special nature of the relationship between the Bank, the borrower, and private parties involved in the procurement process. This thesis proposes to offer a critical analysis of the World Bank procurement system in two specific respects, namely enforcement mechanisms and secondary policies. There are two main objectives in this study. The first one is to examine the current position in respect of those two issues, since there is no literature that offers a significant analysis of these points. Once it is determined what the current position is, this study will offer a critique of the rules and suggestions for reform, based on the particular character of the World Bank procurement system. In terms of the first subject, several options for establishing a complaints mechanism are considered. Since none offer a wholly satisfactory answer for the particular needs of the World Bank procurement system, this study has tried to offer a conciliatory suggestion whereby the current system of suppliers’ complaints would be strengthened by a more formal review mechanism. Regarding the analysis of secondary policies, it is suggested that the current provisions could be improved in three main ways; namely, through a review of the policies set in the Guidelines; through greater use of national policies, and by providing further scope for implementing international standards.

This research identifies and investigates the 'industry-level determinants' of FDI in the context of Asian industrialising countries by using the data on Japanese foreign direct investment in Thailand. It differs from previous empirical studies for non-industrialised countries in three important aspects. Firstly, the previous studies (e. g. Lall and Mohammad, 1983) focus on the determinants of FDI in terms of monopolistic characteristics of industries in which foreign firms operate (e.g. technological intensities and scale economies). The present study, on the other hand, examines the influences of locational-specific characteristics of host industries such as factor endowments, trade costs, and policy factors. More distinctively, it examines the effects of vertical (input-output) linkages among Japanese firms. These effects have rarely been investigated in the context of Asian industrialising countries. Thirdly, it constructs the highly disaggregated data on FDI (4-digit ISIC level), using a broad range of information gathered from various published sources. Such data allow the present analysis to examine in detail the 'pattern' and 'determinants' of FDI distribution across segmented stages of manufacturing production rather than broadly defined industrial sectors. On analysing descriptively the manufacturing distribution of FDI, it was found that Japanese FDI in Thailand was not evenly distributed across manufacturing activities. Some capital- / technology-intensive industries like rail equipment (ISIC 3842) and aircraft (ISIC 3845) did not receive (or host) any FDI during a specified period (1954-1995). On the other hand, other relatively labour-intensive industries like TV, radio, and communication equipment industry (ISIC 3832) and motor vehicle industry (ISIC 3843) received disproportionately large values of FDI. Based on the locational approach to the determinants of FDI in non-industrialised countries, several hypotheses were formulated and quantitatively tested by using cross-sectional data (1985,1990, and 1995). The empirical findings lend strong and consistent support to the postulated hypotheses. It is to be hoped that these empirical findings will not only enhance our understanding of the industry-level determinants of FDI in the context of Asian industrialising countries but also stimulate further work on this line of research.

This thesis is aimed at exploring and understanding important issues concerning the formation process of international strategic alliances of Thai financial enterprises (TFEs). International alliance strategies have been deployed as an important device to stabilise and internationalise a number of TFES. In addition, as the Thai financial industry has been growing rapidly and changing over the past few decades, the industry was chosen as representative of an industry that is dynamic and in a period of transformation. The study focuses on TFEs' international strategic alliances that had been established up to the end of 1996. This period is considered to be the introductory and growth stages of the Thai financial industry. The main context of the research involves the formation stage of international alliances of Thai financial enterprises, comprising motives, criteria, and the timing of alliance development. The motives and underlying reasons stimulating international alliances, major considerations in foreign partner selection, and the strategic timing of alliance arrangements lie at the heart of the research. Moreover, co-operative performance of the alliances also supplements the above issues. The final conclusions of the thesis are drawn from a comparative analysis of the quantitative and qualitative approaches. The empirical data obtained from both surveys and case study research are cross-examined and discussed. The main conclusions of the study are as follows. Thai financial enterprises (TFEs) seemed to pay significant attention to both major aspects of alliance motives, including opportunistic (offensive) and risk-concerned (defensive) approaches. In greater detail, these motives are composed of market-defensive motives, resource-defensive motives, market-offensive motives, and resource-defensive motives. This was due to intense competitive pressures from both domestic and foreign markets as well as the increasingly unpredictable demand conditions in the industry. However, as the economic performance of the Thai financial industry had been prosperous for decades and the long-term view of the industry remained promising, TFEs' cross-border alliances were also aimed at acquiring and utilising partners' resources as well as further advancing their market and operational scope.

This thesis contributes to the extant research on international finance by presenting a collection of three separate essays. The first essay tests the validity of long-run Purchasing Power Parity (PPP) in two panels of real exchange rates for 13 OECD countries (1989:07-2012:11, 1989:07-2006:12). Three panel unit root tests are applied, one that assumes cross-sectional independence, one that accounts for cross-sectional dependence using a single factor approach, and one that controls for cross-sectional dependence through a multi-factor approach. The main difference in the results is attributed to ignoring or allowing for cross-sectional dependence. The second essay also examines long-run PPP, but uses a panel cointegration test which allows for (i) heterogeneous and multiple structural breaks and (ii) crosssectional dependence. Based on a panel of 53 economies (1992:01-2014:05 ) no evidence of PPP can be found using two types of models that can be equipped/illequipped to handle the potential presence of structural breaks in the data. The third essay employs a factor approach to analyse exchange rate prediction at multiple horizons, from 1 month to two years for a panel of 10 OECD economies spanning the period 1999:01-2013:04. Two new models are proposed, that are based on the separate use of forward rates and interest rate differentials to be added in conjunction with the extracted factors. Factor-based exchange rate models were found to beat the random walk model for long horizons over the latter parts of our forecasting sample.

This thesis contributes to the existing literature on market microstructure by presenting three essays on the market microstructure around ex-dividend days. The first essay studies the market microstructure “footprints” associated with trading and tax-arbitrage activity around ex-dividend day using a sample of FTSE 100 stocks. Specifically, the first essay asks whether bid-ask spreads, price volatility and order submission strategies change as stocks transition to the ex-dividend day. From the results there is evidence of the presence of both tax- arbitrageurs and liquidity suppliers around ex-dividend day. Furthermore, the findings support that increases in spread, volatility, return and execution probability around ex-dividend day attract liquidity suppliers and tax-arbitrageurs. The second essay investigates whether the lack of liquidity prevents the presence of ex-dividend trade activities, and how the behaviour of tax-arbitrage traders, if there are any, could affect bid-ask spreads, price volatility and order submission strategies using a sample of FTSE SmallCap stocks. The results show that illiquidity seems not to prevent tax-arbitrage activities altogether. Although, the findings suggest effects associating order submission to spread, volatility and to return, they do not support any effect associating order submission to execution probability. The third and final essay analyses intraday patterns related to bid-ask spread, trade volume and price volatility around the ex-dividend day for a sample of FTSE 100 companies. The results show that volume towards the end of the trading day is .greater .both on ex- and cum-dividend days, among firms that are the most attractive targets for tax-arbitrage. The findings show that the spread towards the end of the day is greater both on ex-dividend and cum-dividend days also though here the effect is confined to the last half hour of the trading day for the firms that are the most attractive targets for tax-arbitrage. The classification of whether a firm is an attractive target for tax-arbitrage is based on whether the price impact less than a specified threshold. Finally, the results and patterns noted above become masked in the large pool comprising all firms because the effects that are identified for firms that are the most attractive targets for tax-arbitrage are offset by the effects that are identified for the firms that are the least attractive targets for tax arbitrage.

Research in consumer financial decision making has received considerable attention in recent years. This thesis contributes to the literature on financial literacy and measuring underlying behavioural characteristics to explain individual choice, as well as the experimental literature on the certainty effect and robustness of experimental results. The thesis is separated into three substantive chapters. The first two substantive chapters use individual level survey data of a representative sample of UK households to investigate the role of financial literacy and behavioural traits in (i) the simultaneous holding of consumer credit and liquid savings, i.e. the `co-holding puzzle', and (ii) mortgage choice. My results show that underlying individual traits are important predictors for consumer choice. Households with self-control issues are significantly more likely to co-hold substantial amounts, consistent with the notion that co-holding is a form of self-control management to limit consumption. My results also show that individuals with low levels of financial literacy and an impulsive present bias for consumption are significantly more likely to hold alternative, non-amortising, mortgage products. This suggests that these mortgages may attract consumers who are less likely to sufficiently understand their features, and who put more weight on present consumption. The third substantive chapter reports and discusses evidence from two experimental studies, motivated by evidence that people may prefer simple and/or certain options disproportionally. The first study investigates the certainty effect using a new laboratory design that goes beyond the pairwise-lottery choices typically used in the literature. The results provide little evidence of a certainty effect in this setting, where subjects can choose from eleven options. In the second study, I attempt to replicate the results of the original experiment that suggests that people are significantly more likely to prefer simple options when faced with larger choice sets. I follow the procedure of the original design, but my results provide no evidence for a disproportionate preference for simplicity. Instead, subjects choose according to their risk attitude.

A recent trends report estimates that the total value of US-domiciled assets under management using socially responsible investment (SRI) strategies is $6.57 trillion. This represents more than one out of every six dollars under professional management in the United States (Forum for Sustainable and Responsible Investment, 2014). In Europe, a recent report by the European Sustainable Investment Forum reports that the total value of European assets under management using SRI strategies is in excess of €6.9 trillion (Eurosif, 2014). Consequently, the importance of SRI to financial practitioners and academics is considerable. This thesis examines the performance, risk and exposures of US SRI indices, UK SRI equity funds (domestic and global) and US SRI funds (large cap, mid-small cap, balanced and bond) to investigate a number of issues relating to the performance of SRI portfolios. The work highlights the potential psychological returns which may be related to investing in SRI funds through shareholder activism and discusses the relationship between the potential risks and returns that are associated with this form of investing. The study finds that the requirement to screen can detrimentally affect the performance of SRI portfolios, but that these effects are more pronounced for UK funds which predominately employ negative screening techniques, than US SRI portfolios (indices and funds) which principally employ positive and restricted screening methodologies. The investigation also discovers that SRI portfolios with smaller investment choice, such as those that can only invest in the UK stock market are more affected by SRI screening than those with large investment universes such as global or US equity funds. This finding is consistent with the smaller investment universe of an SRI fund, making it more likely SRI screening will affect the fund’s performance and risk. Post screening, a fund manager may find it more difficult to purchase assets with the potential to provide a good return or to diversify risk effectively. SRI screening also affects the sector exposures, industry exposures, systematic risk and idiosyncratic risks of UK SRI funds, indicating that screening can result in SRI portfolios holding significantly different assets from conventional funds. In addition, the intensity with which a UK SRI fund screens is shown to significantly affect risk-adjusted performance. Importantly, this study also finds that US SRI funds are more likely to vote affirmatively with shareholder proposals which relate to social and environmental issues than their conventional counterparts and are more likely to vote against company management on these issues. This finding is consistent with SRI investors receiving a psychological return through the shareholder activism of SRI funds.

The present thesis examines how stock returns in the UK market are related to two specific firms’ characteristics that have attracted the interest of policy makers and the academic literature due to their importance during the recent global financial crisis: i) the financial constraints that firms face in their attempt to invest and grow at their desirable pace and ii) the level and structure of the compensation that corporations pay to their executives. Chapter 2 examines how the financial constraints that firms may face in their attempt to invest and grow at their desirable pace are related to the stock returns earned by their shareholders during the period 1988-2010. To this end, Chapter 2 uses a survivorship bias-free sample of firms listed on LSE and a series of proxies to measure the degree of financial constraints that these firms face. Classifying firms as financially constrained or unconstrained according to each of these proxies, we examine whether the most financially constrained firms yield a higher level of returns to investors relative to the least constrained ones. The main finding of Chapter 2 is that investors in highly constrained firms were not rewarded for being exposed to this aspect of risk, regardless of the utilized proxy. To the contrary, the portfolio containing the most constrained firms underperformed the portfolio containing the least constrained firms in most of the cases we have examined. Chapter 3 examines the effect of firms’ financial constraints on the response of their stock returns to UK monetary policy shocks during the period 1999-2011. These shocks are extracted on the meeting days of Bank of England’s Monetary Policy Committee. Using a survivorship bias-free dataset of firms listed on LSE and a number of proxies to measure firms’ financial constraints, we find no significant evidence to support the argument that the return response of the most constrained firms is of greater magnitude relative to the corresponding response of the least constrained firms. The opposite is actually true for most of the measures we use. Moreover, we find that the inverse relationship between monetary policy shocks and stock returns became positive during the 2007-2009 crisis period. Finally, the relationship between stock returns and monetary policy shocks in the UK market exhibits state dependence, especially across tight versus loose credit market conditions. Chapter 4 examines the relationship between the level and the structure of the compensation that firms listed on LSE pay to their executives and the subsequent returns that their shareholders earn during the period 1998-2010. Total CEO compensation is decomposed into its cash- and incentive-based components. The results in Chapter 4 indicate a strong negative relationship between CEO incentive pay and future shareholder returns. Moreover, the outperformance of firms with low pay is less pronounced but still apparent when longer investment horizons are considered. Finally, we provide evidence that, in contrast to incentive pay, cash pay is not found to be related to future shareholder returns in a statistically significant way. Chapter 5 concludes this thesis, providing an overview of its contributions and empirical results, outlining their implications and discussing issues for future research.

Islamic finance has grown in prominence and is now widely regarded as a viable alternative to conventional, mainstream finance. However, this rapid growth has been accompanied by a number of pertinent issues relating to the alleged unfavourable performance of Shariah-compliant indexes, the limited availability of risk management tools and the framework of governance and regulatory standards with the Islamic banking and financial system. This thesis seeks to assess the state of both performance and development of risk management within the Islamic financial system. It investigates these issues through a variety of methods such as quantitative portfolio creation and econometric modelling of diversification benefits, theoretical development of a financial risk management tool and qualitative analysis of semi-structured interviews on the perceptions of how governance and regulatory standards affect both the performance and financial innovation within Islamic finance. The results presented in this study provide robust arguments for the inclusion of Islamic indices within conventional portfolios both from a performance and diversification standpoint thus vindicating the viability of Islamic finance not only as an investment option but also a risk management option. Moreover, the research puts forward a new structure for an Islamic call-option, based upon risk-sharing rather than risk-transfer, which highlights the benefits of constructing financial risk management products through Shariah-compliant rules. Finally, the research also underlines the consensus of market participants behind central regulatory standards to enhance stable and continual growth and development of the Islamic financial system.