Credit may mean both a way of doing business and the reputation of the individuals transacting it. Both aspects are explored in this thesis. Access to sources of finance for business and the ways in which trade credit transactions took place are amongst the economic issues examined. The cultural aspects of credit, such as trust, personal standing and the language in which this was expressed, adherence to, or deviation from, socially acceptable standards of behaviour, are discussed. Credit is used as a tool of analysis to investigate orthodoxies about women's use of it for business purposes. Small-scale capitalism, with its specific objectives of industrious independence and economic individualism centring on the family firm, provides the organising concept and the explanation for how and why women from the middle ranks of society ran businesses during the late eighteenth and early nineteenth centuries. Findings, based on the business activities and trade credit transactions of women resident in, or conducting business in, the English West Midlands, reveal their greater participation in the economic community than has been recognised hitherto. Furthermore, they indicate that trade credit transactions between men and women regarding the new consumer goods and services of the first industrial revolution were not an arena for the working out of gender politics. Women belonged to mixed-sex business networks where they were judged, as men were, on the punctuality of their payments and the honouring of their obligations. As a result, the limitations of the existing historiography are shown. Arguments for a specifically female type of credit negotiated between women principally for domestic purposes or that women with capital restricted their economic activity to investment to provide for their non-working existence do not do justice to the 'middling sort' businesswomen whose contribution to the processes of industrialisation is now recognised in this work.

This thesis is about interest rate modelling with applications in pricing and risk management of interest rate derivatives and portfolios. The first part of the thesis is developed within the random field framework suggested by Kennedy (1994). The framework is rich enough to be used for both pricing and risk management, but we believe its real value lies in the latter. Our main objective is to construct infinite-factor Gaussian field models that can fit the sample covariance matrices observed in the market. This task has not previously been addressed by the work on field methodology. We develop three methodologies for constructing strictly positive definite covariance functions, characterising infinite-factor Gaussian fields. We test all three constructions on the sample covariance and correlation matrices obtained from US and Japanese bond market data. The empirical and numerical tests suggest that these classes of field models present very satisfactory solutions to the posed problem. The models we develop make the random field methodology a much more practical tool. They allow calibration of field models to key market information, namely the covariation of the yields. The second part of the thesis deals with pricing kernel (potential) models ofthe term structure. These were first introduced by Constantinides (1992), but were subsequently overshadowed by the market models, which were developed by Miltersen et al. (1997), and Brace et al. (1997), and are very popular among the practitioners. Our objective is to construct a class of arbitrage-free term structure models that enjoy the same ease of calibration as the market models, but do not suffer from non-Markov evolution as is the case with the market models. We develop a class of models the within pricing kernel framework. I.e., we model the pricing kernel directly, and not a particular interest rate or a set of rates. The construction of the kernel is explicitly linked to the calibrating set of instruments. Thus, once the kernel is constructed it will price correctly the chosen set of instruments, and have a low-dimensional Markov structure. We test our model on yield, at-the-money cap, caplet implied volatility surface, and swaption data. We achieve a very good quality of fit.

Attitudes to environmental and investment risk are examined to determine whether they were a defining characteristic of middle-class behaviour in the period 1760 to 1850. Approximately 6,000 investors in eleven canal companies and seven railway companies were investigated to determine whether evaluation and mitigation of investment risk is determined by socio-economic background and gender. Investment risk was defined as inadequate access to, and imperfect interpretation of, information. The effectiveness of information transfer through public and private spheres was examined and the effect of differential access to these information conduits, as a consequence of gender or socio-economic background, was investigated. Investors' response to the risk environment of early death, war and unpredictable economic cycles was examined. Each canal company and the group of railway companies was ranked according to the level of investment risk during both the construction and operating period, using a mix of quantitative and qualitative tests. The risk preferences of 'economic' and 'financial' investors were compared. The strategies used by each group of investor to mitigate risk were examined. The study provides new evidence of the effective transmission of national market sentiment by the 1770s, but reveals that the physical market in canal company shares remained local and continued its separate existence long after the institutionalised national market for railway shares was established. Perceptible differences in the risk assessment and risk mitigation strategies of different groups of investors were observed. This was attributed to differential access to information, which in turn was attributed to gender and social, political and religious affiliation. The study provides evidence that although differences in behaviour were observed amongst groups within the sample population, it shared common investment strategies and that attitudes to risk and risk mitigation should be considered as valid criteria for class differentiation.

The purpose of this thesis is to study the pricing and credit risk of corporate debt using structural and reduced-form approaches. We discuss the theoretical aspects of three important topics in pricing risky debt: (i) the impact of stochastic interest rates, and hence the interaction between market risk and credit risk; (ii) the impact of diversifiable and non-diversifiable jump risks on pricing and default mechanisms, and (iii) a reduced-form model with a firm’s fundamental variables. To investigate the relationships between market risk and credit risk, we develop a flexible binomial framework for valuing credit-sensitive instruments by generalizing the valuation model of Geske [1977]. We price a defaultable coupon bond when interest rates and a firm’s asset value are stochastic. Our results confirm our belief that firms with low credit quality should have more market risk than firms with high credit quality. We discuss the implications of the results for capital adequacy. In addition to providing conceptual insights into the default behaviour, the flexibility of our method allows for efficient pricing of other credit-sensitive instruments. To improve the short-end properties of credit spreads, we model a firm’s asset value as a jump-diffusion process. We show several significant implications of the jump process for the term structure of credit spreads. We also discuss the effects of the disversifiability of jumps on corporate debt pricing. We prove that without considering systematic jump risk, theoretical models tend to underestimate credit spreads. Another contribution of this thesis is the incorporation of taxes into our model to show that taxes do have significant effects on levels of credit spread. Interestingly, the model implies that a decrease in the federal tax rate may precipitate an earlier default of low-grade bonds. Finally, we investigate a reduced-form model of corporate debt, by taking into account stochastic interest rates, a firm’s equity values, and hazard rates of default. Through a moving average of a log-transformation of equity prices, we introduce structural characteristics of the firm into the model. This is an innovation.

The aim of this thesis is to explore which laws and institutions are essential for a strong, well-developed and efficient securities market in Saudi Arabia. In connection with understanding the significance of the subject matter, this dissertation seeks to explore the development of the modern securities market, assess the recent efforts to create new rules and institutions that could modernise the market, and offer suggestions for reforms that could stimulate further market development. This addresses the issues of coherence in regulatory and supervisory rules and norms at national level. The Saudi market is not as competitive as other regional markets. It is a bank-dominated system in which several large institutions exert significant influence on the pattern and structure of market activities. The absence of non-bank intermediaries within the financial system has meant that the Saudi market is structurally less well developed. Indeed, the lack of competition in the market, due to the absence of market makers, has led to acute problems in the area of finance, where the lack of competition in the market has resulted in higher prices and a lower level of liquidity. At the same time, there are serious regulatory problems associated with a bank-dominated system. Recent work on these markets has shown that they are characterised by insufficient transparency, wide bid-ask spreads insider self-dealing and market manipulation. This thesis examines the transformations taking place in the regulation of the Saudi stock market and considers them against the backdrop of increased competition from other national exchanges in the Gulf region. This work also investigates the pressure to remove protectionism regulation put on the national supervisor by large investors seeking more accurate and timely information and the limitation of insider trading by structural insiders. This thesis will seek to show that the introduction of regulatory reforms could yield significant benefits for investors. The prospect of greater transparency and public disclosure of information about companies could enhance the relative liquidity of the Saudi Arabian exchange and lower the cost of transactions.

This aim of this thesis is to develop a comprehensive methodology for assessing performance and setting targets in multi-unit organisations in the financial sector. These are structured as networks- of decision making units (DMUs) that seek to operate efficiently, satisfy customer requirements effectively, and generate profit. The achievement of this objective relies on the use of the Data Envelopment Analysis (DEA) method, which is the main subject area of this thesis. It involved the development of new models and methods for performance measurement and improvement at the DMUs. To ensure the relevance of the methodology developed, a commercial bank is used as a case study. The models and methods developed were motivated by the study of the bank branches from this institution and illustrated with empirical data. This helps to guarantee that the developments are driven from the needs of the organisations, which contributes to move the DEA method into the 'real problem' zone. An effort is made to ensure that the models and methods developed in this thesis are generic and applicable to other types of 'for-profit' organisations outside the financial services sector. The thesis is structured as follows. An overview of frontier analysis methods, with particular emphasis on the DEA method is presented in Chapter 2. This chapter sets up the ground for the enhancements to the DEA method presented throughout the thesis. Chapter 3 reviews the literature on banking performance assessment. It summarises the main aims, methodologies and conclusions of previous research, with emphasis on the studies based on the DEA method. The information gathered is used to guide the choice of the themes and questions addressed in the context of the analysis of financial institutions' performance. Chapter 4 introduces the commercial bank analysed and the financial sector where it operates. The description of the bank concerns the methods currently used to assess branches' performance. Chapter 5 develops a framework for performance appraisal, integrating efficiency and profitability dimensions. In the context of financial institutions' assessment, it is proposed the assessment of efficiency from two different perspectives, corresponding to the operational activity and the outcomes of financial intermediation. In order to provide a comprehensive efficiency assessment, a new DEA model is used, which can identify inefficiencies in both input and output levels, considering an objective of cost minimisation. The resulting efficiency measure is decomposed in order to provide a comprehensive picture of the inefficiency sources and its managerial implications. The following chapters explore different aspects of operational efficiency in greater detail, providing both enhanced models of efficiency measurement and target setting. Chapter 6 focuses on the analysis of the effect of scale size on efficiency. Performance improvement issues relating to the choice of appropriate benchmarks and practical aspects relating to the implementation of the DEA results are addressed. Chapter 7 focuses on the analysis of cost efficiency considering different price scenarios, including price uncertainty at the DMU level and situations where both input and price adjustments are possible. Chapter 8 explores the differences in performance of groups of bank branches in different locations, associated with distinct environmental conditions. A new performance index is developed, which can disentangle within-group managerial inefficiencies from those attributable to the context within which the DMUs are required to operate. Overall, this thesis contributes to illustrate the relative strengths of DEA with respect to a multitude of purposes of performance evaluation and improvement. It also provides a comprehensive assessment of a financial institution, which shows that the DEA method can be successfully used as a decision support tool for many issues faced by these organisations.

Despite the fact that small manufacturing businesses are still the core of manufacturing in the UK very little is known about their financial dynamics. This thesis investigates these activities from a chaos and chaos theory related standpoint. Since chaos treats dynamic situations, and businesses are intrinsically dynamic, a reasonable expectation is that the one is relevant to the other. However as the research progressed, into detailed appraisals, it became evident that initial, optimistic expectations regarding their relevance were ill-founded. Therefore a conclusion is reached that chaos and chaos theory, despite a voluminous literature, have little relevance to financial decision-making in small manufacturing businesses. The greater part of chaos literature relates to various branches of mathematics, the physical and life sciences. Economics occupies third place. Paucity of references to small manufacturing businesses justifies attempts, such as this, to bridge the gap between them and chaos by explanatory and, interpretative research. Chaos is the main artery, one of two main divisions. It is sub-divided into chaos, the condition, chaos and related theories, and chaology, the techniques. The other main division comprises first an extended study of small manufacturing businesses, which have many, sometimes difficult-to-quantify, financial variables, and secondly hands-on experience as an owner/manager. Evaluating the two, by comparing and contrasting, was intended to be central to the thesis. Instead it became apparent that no there is no pre-existing agreement on key factors. Formulating working definitions ameliorates the problem and allows the evaluation of chaos, in the context of varied financial success in small manufacturing businesses, as well as other theories, to proceed. The financial information needs of their decision-makers, typically owner/managers focus the evaluation. Contributions to knowledge are two. First is finding chaos to be only marginally relevant. Secondly, at the end of the research when considering chaological techniques, a chain of thought is triggered which leads to a novel, technology-basesd mall manufacturing business financial information technique. Small business computerised accounting, and factory loading systems, image processing, (in which hands-on experience, mentioned in the study was gained), pattern recognition, shape analysis and artificial intelligence are combined in the technique.

Foreign Direct Investment (FDI) is playing an increasingly important role in the economies of many less industrialised countries. The Caribbean, specifically Jamaica, Barbados and Trinidad-Tobago are excellent examples of this phenomenon. The increased dependence of these countries on FDI calls to question the attractiveness of their business environment to the foreign investor. This study aims to provide answers to this research question. To this end, it examines the factors that influence the motivations, locational choices and market entry mode of multinational enterprises making investment in these three countries. This study also seeks to ascertain the extent to which these factors are influenced by the timing of the investment decision, the type of FDI (market-seeking, resource-seeking and export-seeking) and the country of origin of the investor. It is also concerned with the factors that influence the initial investment decision as well as the decision to continue operations in the countries. Fourteen hypotheses were advanced from the International Business literature. A triangulation approach to research methodology was employed in the study. The hypotheses were initially tested by means of a mailed questionnaire survey which was administered to 299 executives of multinational enterprises that operate in the three Caribbean countries. The hypotheses were further tested using the qualitative method of a case study approach. Twelve core cases of multinational enterprises operating in the export sectors of the three Caribbean countries were analysed. This study demonstrated the non-applicability of several of the FDI theories to the realities of small, developing economies. These theories were developed largely to explain the behaviour of firms originating in industrialised countries and making investments in these countries. Hence, several did not seem to fully explain the FDI process undertaken in the Caribbean. One notable exception was that of the "Double Diamond" model. The study showed that the "Double Diamond" model is a powerful framework for analysing the business environments of the three Caribbean countries studied. This study also illustrated the importance of government implementing strategies to ensure that the business environment is supportive of the foreign investor. Further, the study suggests that investments need to be made in human resource development, and institutional and infrastructural improvements. It also revealed that the investment incentive package needs to be revised and a nexus created between the government and the foreign investor. Finally, the study suggests that support needs to be given for the development of the locally owned firm.

The study of the bid-ask spreads of stocks is important since they constitute the mechanism through which trading costs are incorporated into prices and recovered by market-makers. Realized spreads are a measure of the trading costs which private and institutional investors have to cover whereas quoted spreads are important in revealing the price-generating mechanisms involved. A comprehensive trade-indicator model of the bid-ask spread of common stocks has been developed which, unlike previous research, has incorporated trading volume, the depth at the quoted prices, the waiting-time between trades, as well as the fixed-cost-of-trade into equations for the changes in the quoted-spread, the ask, the bid and the transaction prices. The parameters of the models have been estimated using intraday data of NYSE and NASDAQ stocks, split into deciles on the basis of their trading activity as measured by the number of shares traded. For both exchange mechanisms I find that a large adverse-selection cost, which depends on the trading volume and a smaller inventory-holding cost are present in the quoted spread and that the parameters of both of these vary with trading activity. These costs are asymmetric in the bid and ask sides of the quoted spread, a feature not analyzed in previous empirical work. Only a small part of these costs is recovered in the realized spread through trading. My estimates of the adverse-selection cost present in the realized spread are close to the values given by other researchers but the size of the inventory-holding cost is found to be much lower probably owing to the shorter time-horizon of the data employed. The depth at the quotes is found to be symmetric, to affect the size of the spread of both the NYSE and NASDAQ stocks and also to be present in the realized spread. The parameters of the above components, as well as the fixed-cost-of-trade, are estimated and their patterns for the two trading mechanisms examined are compared and contrasted. Weak evidence is found for the waiting-time between trades both in the quoted and the realized spread. The results of this thesis, apart from offering support for recent empirical evidence which indicates that information first enters the price-process through the depths of the quotes and not the spread, also contribute to the formation of a more theoretically sound explanation. Moreover, the finding in this thesis that the adverse-selection cost for NASDAQ is larger compared to that of NYSE stocks is in line with other recent empirical research

There has been a new wave of merger and acquisitions (M&A) activity since the early 1990's across the world, much of this occurring in the financial services industry. This trend has affected Europe as well where the landscape of the financial services industry has been changing. This M&A activity in general has stimulated more in depth research to assess the consequences of the merger events, although comparatively little work has been done on M&A activity in the European financial services industry. This thesis uses a market return approach and an operating performance approach to evaluate the M&As outcome in European banking. We document a minimal total return, and a smaller target return in comparison to US studies. The post-merger operating cash flow return on assets deteriorated but we also found a very minimal improvement in efficiency which was not supportive enough to boost the cash flow return on assets and the profitability of the merging partners, although these mergers were mainly motivated by synergy. Deeper research may provide more interesting findings using clinical studies that seek as much detailed information about the merging partners as possible. It is also worth examining the pattern of managerial ownership and how it affects the merger outcome as this factor is an important one for regulators in the financial services Industry.