Development finance institutions put money into capital projects where conventional intermediaries are reluctant to get involved, and/or where there is a political preference for this channel of investment. In the last few decades D.F.l.s have especially proliferated in developing countries. Unfortunately experience has been disappointing. Most D.F .1.s have got into financial difficulties, and have not done much for economic growth. A number of factors can be postulated as responsible for this record. However, the concept of the 'soft' state as a causal factor has not been applied in a structured manner to the problem. The following pages isolate 'soft' state effects on D.F.1. experience via substantial Kenyan and Zimbabwean case studies. The first part of the thesis is largely theoretical. The concept of the soft state is discussed, and then a consideration of (i) the place of financial intermediation in development, (ii) the normative goals that often bias government policy and (iii) the nature of financial systems in developing countries, leads to a delineation of a role for development finance institutions. The second part investigates the major 'general' D.F.1.s in Kenya and Zimbabwe in order to test the deductions made and the hypothesis postulated in Part 1. As necessary background to the D.F.1. analysis the history, the ideological bases, the economics and the financial systems of the countries concerned are discussed. The work on the D. F. 1. s themselves leads to some preliminary conclusions as to the effect of the soft state on their operations. The third part synthesises the material from the previous chapters, and draws some conclusions as to how soft state features have affected the structures and work of D.F.1.s in Kenya and Zimbabwe. A number of recommendations related to the role and behaviour of D.F.1.s in developing countries are made at the end, and some suggestions for further research. There are three appendices after the final chapter. The first analyses the concept of rent generation by and rent extraction from companies in developing countries and the second formulates a rule as to when D.F.1.s should sell profitable investments. The third looks briefly at some other developing country D.F.1.s.

The development of an international financial centre has long been an interesting topic to economists, researchers and policy makers. Understanding the development process and the critical success factors helps much in formulating the suitable strategic development plan for the city and more efficient allocation of resources. Among the various international cities or financial centres, the development dynamics of Hong Kong and Shanghai are of high interest to many researchers not only due to the fast emerging growth of the Chinese economy and its influence on the world economy, but also due to the different economic development path of these two places. Using Hong Kong and Shanghai as examples, this paper reviewed and assessed how closely the link between academic literatures, such as Supply and Demand Theory (Smith 1776) , Location Theories (Thunen 1826, Weber 1969, Losch 1954) and Central Place Theory (Christaller 1966, Crocco, Calvante and Castro 2006), Urban Economic Growth Theory (Jacob 1975), Economies of scale (Rosenthal and Strange 2001), Self-reinforcing (or Cumulative Causation Theory) (Pagano et al 2002), Regulations and Prudential Supervision, and Resources based view (Barney 1991), etc., on this topic against the actual historical development of these two places. A survey was constructed to identify from perception of finance industry practitioners the most important key success factors that contribute to the development of these two places as international finance centres. The six most important factors identified are (1) Political Stability; (2) Infrastructure; (3) Regulation and Prudential Supervision; (4) Legal / accounting / governance systems; (5) Market Openness; and (6) Labour supply & quality. Comparing the two places, the survey also revealed that Hong Kong, in general, was perceived to have better infrastructure, financial market regulations, quality of human resources, economic environment and political environment & government support than the Shanghai counterpart. Compared with Hong Kong, Shanghai was still lacking behind in the development stage of becoming an international finance centre, though it was catching up fast. Looking forward, for either or both Hong Kong and/or Shanghai to further strengthen their status as international financial centres, it will to a large extent hinge on how well the policy makers of these two places can further enhance these key success factors. The paper covered a discussion of the future prospects of Hong Kong and Shanghai and at the end of it, various directions of future research were recommended.

While the world has witnessed the growing use of derivative instruments and rapid expansion of derivatives markets over the past two decades, the extensive use of derivatives in developed markets, particularly of mortgage-related derivative products has been blamed for the recent global financial crisis. The supervisory bodies across the world have increasingly paid attention to the establishment of an effective governance system including the issuing of financial reporting rules for companies to disclose their derivative activities. By far derivatives research has predominately been based on western developed economies; little has been known about reporting and disclosing of derivatives from developing economies. The motivation of this study is to fill the research gap with the primary aim to assessing the usefulness of derivative related disclosures in China - the largest developing economy in the world. The study is divided into two major stages. The first stage mainly intends to reveal the degree of derivative related disclosures provided by Chinese listed companies. Annual reports of 53 Chinese listed firms are considered as the sampling unit for observation and analysis. Using the content analysis approach this study compares the derivative related information disclosed in companies' annual reports with the developed disclosure index that is largely based upon IFRS and IAS provisions. The study has found: First, the level of the compliance with IFRS and IAS derivative regulations by Chinese quoted companies is generally low. Second, Chinese listed companies are likely to prefer the use of equity derivative products rather than other types of derivatives. Third, the corporate size seems not to significantly affect the amount of derivative related disclosures by Chinese quoted companies. Fourth, the amount of derivative disclosures about the significance of using derivatives for the company's financial position and performance is significantly greater than that of information in relation to potential risks arising from the use of derivative instruments. The second phase primarily intends to examine the usefulness of derivative disclosures perceived by equity market participants. The study conducted in-depth interviews with 21 institutional investors including 10 investment managers and 11 professional analysts. The key findings include: First, the disclosed information about the use of derivative instruments by quoted firms is perceived to be useful and helpful in facilitating investment decisions. Second, the information related to the use of derivatives is generally thought to play a minor role in facilitating investment decisions. Third, the current provisions of derivative related information by Chinese quoted entities are generally unsatisfied by most of institutional investors. Fourth, the current accounting and reporting policies imposed by regulators seem to be very difficult for Chinese investors to understand. The study, the first study of its kind, contributes to the understanding of the current status and usefulness of derivative related disclosures in China. It also provides the valuable insight to the development of derivative reporting standards by offering some policy implications particularly to developing economies.

This thesis investigates two main aspects related to the use of credit default swaps (CDS) by European banks. The first area of investigation focuses on the relationship between the CEOs' risk-taking incentives generated by stock option compensation and the usage of CDS by banks. This thesis contributes to the existing literature in risk management with derivatives, which initially assumes that the use of derivatives is intended to reduce firm risk, by distinguishing between CDS use for hedging purposes and CDS use for trading purposes. The relationship between CEOs' risk-taking incentives and CDS use in banks, and the influence of CDS use on bank's risk are investigated based on the purpose of CDS use. This thesis utilises the estimates of the Black-Scholes sensitivity of executives' stock option portfolios to stock return volatility (vega) to test the relationship between CEOs' risk-taking incentives and CDS use. In addition, this thesis distinguishes between the effect of risk-taking incentives on CDS use for hedging purposes, and the effect of risk-taking incentives on CDS use for trading (speculating) purposes. The second key aspect of this thesis is to examine the effect of CDS use on bank risk by distinguishing between the effect of CDS use for hedging purposes and CDS use for trading purposes. The purpose of CDS use that depends upon the managers' risk-taking incentives and the use of CDS can have different implications to the risk profile of the bank. Data for the period of 2006 – 2011 were hand collected from the annual reports of sixty European banks. The sample comprises publicly listed banks from European stock market indices and premier indices of the European Union countries (EU-27). In conducting the empirical testing, the two stages regression approach was used to adjust for the potential endogeneity that could arise between the risk-taking incentives of stock option compensation (vega), and CDS use. The results show a significantly positive relationship between CEOs' risk-taking incentives generated by stock option compensations and CDS use in banks for trading purposes. This implies that higher risk-taking incentives (vega) are associated with greater CDS use for trading purposes. Furthermore, there is a negative linkage between CEOs' risk-taking incentives and CDS use for hedging purposes at weak levels of statistical significance. The results also show strong evidence of a positive linkage between CDS use for trading purposes and bank risk. CDS use for trading purposes is associated with a higher bank's beta and lower distance to default. Further, the results show a positive and significant relationship between CDS use for hedging purposes and bank risk. CDS use for hedging purposes is also associated with a higher beta of a bank and lower distance to default. These results are consistent with the theoretical predictions of Smith and Stulz (1985), who suggest that stock options can influence managers' decisions to use derivatives and lead to greater alignment between the interests of managers and shareholders by mitigating managerial risk aversion. Thus, stock options provide managers with incentives to take on risk. Overall, the evidence presented in this thesis suggests that CEOs' risk-taking incentives derived from stock options compensation is a key determinant of CDS use in banks. Moreover, banks' CDS use increases bank risk regardless of the purpose of its use. Both hedging and speculating CDS activities are associated with a bank's higher risk. This thesis provides an integrated understanding and builds a comprehensive picture of how CEOs' stock option compensation can affect the purpose of CDS use, and how this use influences bank risk. It primarily extends previous empirical literature, which initially looked at derivatives as a risk reduction instrument, by distinguishing between CDS use for hedging purposes from CDS use for trading purposes.

The advancesin communicationa nd computert echnology and the availability of the Internet have made it possible that people can do most of their banking transactions from a remote location even without having the need to visit their local branch. With the growing reputation of Bahrain as a financial centre in the Arabian Gulf region, existing banks face intensive competition from new comers which made the banking industry in Bahrain opt for a more aggressive approach in the development of new online banking services. This thesis reports key findings from an empirical study of the Bahraini banking customer experiences with the adoption of online banking. It provides an understanding of what and how the specific factors influence the decision making process of the bank customers whether or not to bank on the Internet in the Bahraini context. It utilises a theoretical model to examine the intent to adopt online banking service. Using an amalgamated model adapted from two models in the fields of technology research and technology acceptance, this research analysed the relationships between the intention to adopt online banking services and the attitude toward online banking use, subjective norm toward online banking use, selected user perceptions (perceived usefulness, perceived ease of use, perceived risk, perceived behavioural control) and selected user characteristics (age and income). A questionnaire was employed to collect the data for this research and path analysis was used to analyse the relationships between the proposed model variables. Out of the 13 original model hypotheses, 9 were confirmed. However, the overall model was found to be weak in explaining the relationships regardless of their significance. Furthermore, current non-users were segmented and a binary logistic regression was used to predict the possibility of future adoption among this segment. It was concluded that about 88% of current non-users are predicted to be future online banking users in Bahrain. In general, the behavioural intention to adopt online banking service in Bahrain was found to be driven primarily by attitudes toward online banking services, and customers' perceived behavioural control. The practical and theoretical implications of these findings are discussed. In summary, this research helps to identify perceptions and factors that explain the intention to adopt online banking service. These factors may be important to the banks and policy makers who wish to encourage the widespread adoption of online banking services in Bahrain

Credit risk is one of the most general risks that exist in the financial market and a major risk faced by financial institutions. Credit risk management (CRM) is to identify, measure, monitor, and control risk arising from the possibility of default in loan repayments. The primary objective of CRM of rural commercial banks (RCBs) is to maintain risk within acceptable parameters and satisfy the regulatory requirements. CRM has long been the focus of governments, regulatory authorities and financial institutions. This thesis examines the importance of CRM for RCBs, which has been overlooked in the literature, and attempts to develop a CRM framework for RCBs. It has four specific research objectives: 1) to discuss the differences between RCBs and city based-commercial banks; 2) to examine the importance of CRM for RCBs and identify the approaches available for banks to manage credit risks; 3) to identify the key factors that have influenced the credit evaluation and assessment, as well as credit risk control in the context of China's RCBs; and 4) to propose a practicable CRM framework that suits the characteristics of Chinese RCBs. This study adopts qualitative analysis and case study approaches to identify key factors contributing to the failure of RCBs' customers, resulting in loan defaults and banks' credit risk. The quantitative-based CRM tools available for large financial institutions do not meet the requirements of RCBs because the main customers of RCBs are small and medium-sized enterprises (SMEs) and farming households and there is a lack of financial data and credit rating relating to these customers. In addition to normal risks faced by financial institutions, RCBs in China are also exposed to risks specifically to rural commercial banking business and in particular, farming-related loans and services. This study proposes a CRM framework for RCBs in China. The framework is based on the identification of business failures of RCBs' customers and factors contributing to the failures of SMEs and farming households. The framework is divided into five steps. The first step is to distinguish business failure and closure. The second step is to identify factors contributing to the failure of customers, which should be considered from environmental, operational, financial and guanxi aspects. The third step is to use PCA to identify principal factors. The fourth step is to design a credit risk analysis model with an analysis of these principal factors. The final step is to use the credit risk analysis model to manage credit risks of their portfolios and individual loans provided to SMEs and farming households. The CRM framework has been confirmed by practitioners through interviews conducted in the case bank. Interviews raise a number of issues relating to the development of a CRM model and assessment of credit risk of SMEs in China. The case study through an analysis of documents of the case bank reveals the importance of CRM and organisational structure in risk management and CRM. The case study presents evidence of lacking of practical methods in managing credit risk by RCBs in China. The proposed framework expects to address the problem. This study has made several contributions to the literature that studies CRM in financial institutions in general and RCBs in particular. This study critically identifies the current lack of studies specifically addressing the RCBs' CRM, and proposes a CRM framework for RCBs. The framework considers financial and non-financial variables to analyse SMEs and farming household for which financial information is very limited. Using nonfinancial variables along with financial variables as predictors of business failure significantly improves credit analysis quality and accuracy. Also, this study recognises guanxi as risk potentials affecting the business of SMEs and farming households and includes guanxi risks in the framework. The consideration of guanxi in credit risk analysis fits well with China's business environment.

Lloyd’s is analysed within the framework provided by Kay (1995) on ‘distinctive capabilities’ - architecture, innovation and reputation. An examination of Lloyd’s reveals that a dominant feature of the Society is cooperation between syndicates which occurs via a method of trading - the subscription system - and as a consequence of the rulings of the Council of Lloyd’s. Lloyd’s has a reputation for innovation and entrepreneurism. This research argues that this is a direct result of four distinctive aspects of its architecture - syndicates are entrepreneurial organisations, the subscription system of risk placement, the unique capital base of unlimited liability Names and the presence of the Central Fund. The research reveals that Lloyd’s is centered on the primacy of underwriting and that the existence of the Central Fund encourages new syndicates to form. The dynamic of a Lloyd’s syndicate is that of a small business - a small number of people working towards a common goal. Moreover the unique capital base, composed entirely of individuals, does not have a voice in the day-to-day underwriting affairs of the syndicates. This allows underwriters complete freedom to underwrite and to change underwriting policy if opportunities arise. The subscription system of risk placement encourages innovative underwriting and ensures information flows between underwriters. This author suggests that the introduction of a new capital base, limited liability incorporated investors, may stifle the entrepreneurial nature of Lloyd’s underwriters and pose a threat to the subscription system of risk placement. These investors are purchasing Managing Agents, the management structure of syndicates, as well as investing in syndicates. This research suggests that this new capital base challenges the appropriateness of the current regulatory structure and well as posing a threat to the continued existence of the Central Fund. This author recommends that Lloyd’s should abandon self-regulation and should instead be regulated by the Department of Trade and Industry. Furthermore, this author suggests that the Market Board and Regulatory Board should be replaced by a Business Development Board.

THE EU banking systems are facing major changes in the form of increased competition, concentration and restructuring. These changes are triggered by a number of factors including technological change, financial liberalisation and internationalisation. The circulation of the single currency is expected to reinforce these trends. Although the banking industry is in a state of flux, it is possible to discern some overall patterns in the actions and strategies of individual banks. The effects of these responses are mainly reflected in changes in the structure of bank income and, in particular, in the increasing incidence of non-interest income. The analysis of the shift towards noninterest income provides key information for evaluating the extent to which this process could affect banks’ profitability. Profits have become the driving force in market economies. Many banks are keenly interested in earning maximum profits to provide the highest possible return to their shareholders and secure additional funds to support long-term growth. As the EU banking industry continuously evolves, changes in industry composition and the macroeconomic environment have a direct impact on the aggregate performance of the industry. If banks’ profitability becomes more volatile, banking is more risky unless the level of profitability raises substantially. So, there is a clear connection between profitability volatility and banking stability; a high level of profitability volatility is a source of instability in the banking system, augmenting the possibility of bank failures. A move to more interest rate sensitive assets like securities and to off-balance sheet instruments, along with more prone to default assets, like consumption credit, may increase the profitability’s volatility and so the stability and soundness of the banking system. The changes in the banks’ income structure and the determinants of profitability deriving from developments in the banking business will have clear implications on the activity of banking supervision.

This thesis contains three essays on asset pricing. The first chapter examines how introducing an options market affects the liquidity and expected returns of underlying assets when the economy features asymmetric information. I show that introducing derivatives can have opposite effects on underlying asset prices: doing so increases (resp., reduces) prices when the market has relatively more liquidity suppliers (resp., liquidity demanders). Thus the non-monotonic effects of derivatives on underlying assets could reconcile the mixed empirical evidence on options listing effects. Introducing derivatives reduces the price impact of liquidity demanders’ trades on the underlying risky asset but has no effect on its price reversal dynamics. In the second chapter, I solve for the equilibrium of a pure-exchange Lucas economy under jump diffusion and populated by one unconstrained agent and one VaR agent in closed form. First, I show that the VaR constraint can generate excess market volatility and the inclusion of the jump component amplifies this effect, which provides a new mechanism to explain the prevalent smirk pattern of Black-Scholes implied volatility in options markets. Second, the VaR constraint pushes up the jump risk premium. Finally, the VaR constraint can generate a decline in the zero coupon bond yields at the VaR horizon, which is consistent with a flight to safety phenomenon taking place during a crisis. The third chapter, co-authored with Chunbo Liu and Zhiping Zhou, documents a positive relationship between funding liquidity and market liquidity in the options market. Further analysis reveals that the positive relationship is mainly driven by short-term and deep out-of-the-money options. Furthermore, liquidity of puts is more sensitive to changes in funding liquidity. In addition, this paper finds a positive relationship between the options market liquidity and VIX, which is in contrast to the negative relationship documented in the equity market.

This study investigated training and development in Libyan public commercial banks in relation to improving policies and practices to improve skills and performance. It assesses and evaluates training and development from the views of managers and staff. The study considers how organisational culture influences the assessment of staff and their needs and assesses the relationship between gender, experience, qualifications and staff training choices for training. The study has investigated the problems that trainees and trainers encounter in training and how they could be avoided. The attitudes of three managerial levels, top managers, HRM managers and training and development managers were obtained via 351 survey questionnaires and 12 interviews with three levels of bank managers. No systematic training needs assessment was undertaken professionally at the banks investigated. The specialised training that staff get sometimes takes place abroad and is influenced by foreign banks and financial institutions whose operating methods can conflict with Libyan banks and culture. Training material is mostly in the form of lectures, discussions, seminars and other traditional methods of training. Training improves job satisfaction, reduces absenteeism and contributes to a sense of workplace belonging. Nevertheless, this study has found that culture plays a significant role in training and the selection of staff for training, particularly for women. Other influential factors affecting HRD strategies are management style, cultural norms and religion. This is one of the first studies to attempt to understand the nature of strategic training and development activities in Libyan commercial banks. It identifies the concerns and problems related to the training strategies adopted in order to improve organizational performance. Additionally, the study identifies and proposes factors that will improve staff training, as well as methods of training assessment and evaluation that are required in the context of a business sector that is essential for economic development.