Socially responsible investment (SRI) has seen a massive growth in the last 10 to 15 years. Much of the literature on SRI is a result of research which has examined SR-investors as a homogeneous group of truly socially responsible investors. However, recent studies have started acknowledging the significance of two motivational criteria that an individual looks at when selecting SRI: these being financial return and social return aspects of SRI. Both these return aspects together determine an individual’s selection of socially responsible investment. Additionally, the balance an investor acquires between these two motives vary from person to person. Thus, suggesting heterogeneity among SR-investors in terms of the importance they place on the two return aspects of SRI. The aim of this study is to empirically explore heterogeneity among SR-investors in terms of the importance they place on both financial and social returns when selecting SRI. Analysis of survey data, (N=298) obtained from investors of Ecology Building Society, showed that SR-investors could be sub-grouped into three unique segments on the basis of the importance these segments hold for the financial and the social return aspects of SRI. These groups are: financial-return driven investors, social-return driven investors and dual-return driven investors. One-way ANOVA, post- hoc tests, discriminant analysis, chi2 tests and regression analysis were employed to rigorously validate this typology of investors. Pro-social attitude, perceived consumer effectiveness, trust, value orientations, age, education, income and gender were used as external variables for the validation of the typology/segments of SR investors. The three groups in the typology exhibit different psychographic and demographic profiles according to the specific combination of financial and social return that they exhibit. Also, the values motivating SRI-attitude of each cluster vary, thus highlighting the uniqueness of each cluster. These findings bring new understanding of investors in the 21st century, thus adding to the existing knowledge of investment behaviour and marketing. Marketers can benefit from the findings of this study as they can develop strategies for each segment so as to cater to their specific needs. Policy-makers striving to attain sustainability can benefit from this knowledge as they can determine which values to promote so as to sway people to invest in a sustainable way.

This thesis consists of five chapters. In the first chapter I provide the introduction to the three essays examined in this thesis. In the second chapter I examine the impact of securitization on U.S. bank holding companies’ (hereafter BHCs) credit risk, credit risk taking, profitability, and capital level between 2001 and 2013. I also study the effect of the credit enhancements and liquidity provision on BHCs’ performance between 2001 and 2013. Since securitization is an endogenous decision, I use the treatment-effects model to control for the selection bias and observe a positive relationship between securitization and credit risk. I also find that securitization decreases BHCs’ profitability, but that securitization increases BHCs’ capital levels. Although it is possible that relatively risk-averse BHCs may consciously increase their capital buffer by retaining earnings, for example, I do not exclude the possibility that BHCs engaged in regulatory capital arbitrage to increase their capital level. Nevertheless, I find that use of securitization for capital regulatory purposes is mitigated by the risk-retention mechanism, i.e. credit enhancements and liquidity provision—banks had to keep the required capital for their extended guarantees. However, as was uncovered during the financial crisis, these credit and liquidity risk-reducing tools were not sufficient to prevent the recent turmoil in the securitization markets. The third chapter analyzes information opacity and systemic risk for the U.S. BHCs in the context of the asset-backed commercial paper (hereafter ABCP) between 2001:Q2 and 2012:Q4. Banks which set up costly ABCP conduits might have benefited from the regulatory capital relief and from providing financing alternatives to their clients. However, they faced costs in terms of the increase in information opacity through the provision of ABCP guarantees to BHCs’ own and third-party sponsored ABCP conduits. Furthermore, I observe that higher information asymmetry about BHCs’ value is associated with higher volatility of returns and also with higher systemic risk. In the fourth chapter I examine the proposal to limit bank size, which is known as tackling the banks’ incentive to become “too big to fail”, and also how this regulation to curb bank size may affect banks’ operating costs. I examine the relationship between the size of BHCs and BHCs’ operating costs from 2001:Q2 to 2014:Q1 to evaluate the costs that the newly suggested regulations on bank size might bring. I find that rules to limit the size of banks could significantly reduce economies of scale. In particular, if large and cost-efficient banks become split into smaller parts, data processing, legal fees, audit and consulting expenses, in addition to expenses on premises and automated teller machines (hereafter ATMs) are likely to increase. I also pay particular interest to legal fees and litigation settlement; I find evidence that larger banks, but not necessarily systemically more risky banks, face litigation charges more frequently. I do not find evidence that larger banks face a lower probability of being fined. This suggests that another phenomenon known as “too big to jail” may not be true, if the assumption is that the misconduct detection is perfect. I do, however, observe that penalties had little effect on BHCs’ profitability, and that some of the largest banks continuously face litigation charges. In turn, this could possibly imply that benefits from wrongdoing outweighed the costs. The fifth chapter summarizes major findings and concludes.

This thesis focuses on the stability, strategic investment decisions and intermediation patterns of banks using different samples that cover many key regions of the world. To this end, three distinct lines of research are pursued. First, an empirical analysis of the relationship between revenue diversification, bank performance and stability in emerging economies is conducted. Second, the initial analysis is extended to the European region and specifically examines how the ownership structure in banks influence the benefits derived from revenue diversification. Finally, using banks in the Mercosur (Argentina, Brazil, Paraguay and Uruguay), the impact of systemic crisis on intermediation patterns is analysed to better understand, the factors that condition the recovery of major bank fundamentals after a crisis. Using different estimation methodologies, different samples, and an innovative approach to the various lines of research, the following robust evidence is provided: first, diversification within and across business lines decreases insolvency risk in emerging economies. Second, in the European region, revenue diversification is beneficial in banks that have a majority shareholder. This is because a large shareholder protects its own wealth by positively influencing strategic investment decisions. In other words, the presence of a majority shareholder will be consistently associated with risk efficient levels of diversification. Third, there is prima facie evidence of a certain level of ―abnormal‖ behaviour in banks in the Mercosur. This manifest in protracted recovery of private sector intermediation, high levels of excess liquidity on banks’ balance sheet and high intermediation spread that persists well after the crisis. The major contributions of the thesis are as follows: all three chapters uses estimation methodologies new to the literature in each area as well an original research approach in order to obtain new insights. For example, the link identified between ownership concentration and revenue diversification is a novel way of analyzing the impact of the latter on insolvency risk, which illuminates the debate on the benefits of revenue diversification that currently exists in the literature. Also this thesis is the first to provide multiple benchmarks for which post-crisis bank behaviour is compared, thus anchoring current debate on the issue. Finally, the empirical results give rise to important public policy considerations. First, the robust positive association between diversification and bank soundness suggests there is no negative trade-off between the diversification strategy and bank performance. As a consequence, there is no compelling reason to restrict banks activity. Regulatory initiatives should therefore focus on ensuring risk efficient diversification strategies are supported in banks. In addition, the role of ownership structure in ensuring market discipline should also not be undermined by immoderate restrictions on ownership of bank shares. The final recommendation is quite simple in concept and very timely for countries designing a path for post-crisis recovery: it is important to implement policies that bring about a sustained increase of confidence in the banking system, as a starting point, a stable macroeconomic environment alongside improved prudential institutional frameworks.

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This research addresses three selected modelling problems that occur in credit scoring. The focus is on segmentation, modelling Loss Given Default (LGD) for unsecured loans and affordability assessment. It is usually expected that segmentation, i.e. dividing the population into a number of groups and building separate scorecards for them, will improve the model performance. The most common statistical methods for segmentation are the two-step approaches, where logistic regression follows Classification and Regression Trees (CART) or Chi-square Automatic Interaction Detection (CHAID) trees. In this research, these approaches and a simultaneous method, in which both segmentation and scorecards are optimised at the same time: Logistic Trees with Unbiased Selection (LOTUS), are applied to the data provided by two UK banks and a European credit bureau. The model performance measures are compared to assess an improvement due to the segmentation. For unsecured retail loans, LGD is often found difficult to model. In the frequentist (classical) two-step approach, the first model (logistic regression) is used to separate positive values from zeroes and the second model (e.g. linear regression) is applied to estimate these values. Instead, one can build a Bayesian hierarchical model, which is a more coherent approach. In this research, Bayesian methods and the frequentist approach are applied to the data on personal loans provided by a UK bank. The Bayesian model generates an individual predictive distribution of LGD for each loan, whose potential applications include approximating the downturn LGD and stress testing LGD under Basel II. An applicant’s affordability (ability to repay) is often checked using a simple, static approach. In this research, a theoretical framework for dynamic affordability assessment is proposed. Both income and consumption are allowed to vary over time and their changes are described with random effects models for panel data. On their basis a simulation is run for a given applicant. The ability to repay is checked over the life of the loan and for all possible instalment amounts. As a result, a probability of default is assigned to each amount, which can help find the maximum affordable instalment. This is illustrated with an example based on artificial data.

This dissertation explores economic integration in the context of the Gulf Cooperation Council countries (GCC), which planned to form a monetary union, by assessing three different but related empirical research questions regarding GCC financial markets and monetary policies. Chapter 2 presents the first essay, which empirically investigates the pairwise linkages and volatility spillovers between GCC stock markets. In particular, the goal of Chapter 2 is to investigate the extent to which past volatility is transmitted from one GCC stock market to another GCC market at the aggregate level (e.g., the general stock markets' price indices), and to determine whether a past volatility in one GCC market affects the current volatility in another GCC market. Furthermore, Chapter 2 attempts to extend the investigation of the volatility spillover at a more disaggregated level by capturing the intra-sectoral linkages and volatility spillover effects among equivalent sectors across the GCC stock markets, namely the banking, industrial and insurance sectors. Empirically, Chapter 2 exploits the causality-in variance test pioneered by Cheung and Ng (1996) and developed by Hong (2001), who introduced a class of asymptotic N(0,1) tests for volatility spillover between two time series that exhibit conditional heteroskedasticity and may have infinite unconditional variances. The second essay, Chapter 3, aims to examine the effect of the recent global economic and financial crisis originating in U.S. stock markets on the stock markets of the GCC countries and to determine whether the sharp falls in these markets were due to the existence of the phenomenon \contagion" or whether they just reflect the continuation of the strong economic and financial linkages between the GCC economies and the U.S. economy, which exist in all states of the world during good and bad times. In particular, Chapter 3 investigates whether contagion exists from the U.S. stock market to the stock markets of the GCC by comparing two sub periods before (stable) and after (turmoil) the collapse of Lehman Brothers, which is the largest bank to fill for bankruptcy in U.S. history and has been widely used by many economists as a benchmark for the U.S. economic and financial crisis (see Bekaert et al. (2012) and Mishkin (2010)). Empirically, Chapter 3 investigates the existence of contagion using the cross-market correlations tests pioneered by King and Wadhwani (1990) and developed by Forbes and Rigobon (2002), who criticized previous studies for their use of unadjusted correlation coeffcients to investigate the presence of contagion across stock markets due to the heteroskedasticity resulting from the bias in stock market returns of the crisis country. Hence, Forbes and Rigobon (2002) introduced the adjusted cross-market correlation coeficient, which does not depend on the volatility (variance) of the crisis country, especially during the turmoil period. The last essay is presented in Chapter 4, in which I investigate the implications of fixing exchange rate on monetary policy in the context of the GCC countries whose exchange rate regimes have been fixed to the U.S. dollar for a long time. In particular, Chapter 4 aims to assess the sensitivity of the GCC countries' interest rates to the U.S. rate, since the theory of interest parity suggests that fixing GCC exchange rates to the U.S. dollar should force GCC domestic interest rates to equal the U.S. interest rate. In addition, Chapter 4 interestingly attempts to assess the stability of this sensitivity across time and to investigate whether there exists a pronounced decoupling for some GCC countries over some sub-periods. Furthermore, the fact that some of the countries' exchange rates have pegged to the U.S. dollar over specific sub-periods, then moved away from the peg over some other sub-periods (e.g., Kuwait) also gives us a rich setting through which to investigate the implications of fixing the exchange rate on monetary policy and to determine whether a country's interest rate has a stronger association with a base country's rate under a pegged period than under a non-pegged period. Empirically, this is done by testing the Uncovered Interest Parity (UIP) of each individual GCC country's interest rate, using the U.S.'s interest rate as the base country. Chapter 4 considers the time series properties of the data and uses unit root and co-integration tests. For each GCC country, it also utilizes a level regression for each interest rate episode throughout the entire sample under investigation; uses the Quandt (1960) Likelihood Ratio statistic (QLR) to determine the timing of any potential structural break during which the country's interest rate sensitivity to the U.S. interest rate changes; and applies the Error Correction Model (ECM) to capture long-run dynamic behaviours between the GCC and U.S. interest rates.

The importance of reputation for corporations is increasingly acknowledged and it is generally recognised that a good corporate reputation can create a competitive advantage. The even higher relevance of reputation for the insurance sector due to the intangible nature of its products is also accepted. Trust is also seen as vital for business transactions in general and for insurance transactions in particular. However, based on the literature review there is no generally accepted definition of reputation and trust. There is also no consensus how these two concepts differ or how they interact. This thesis argues that reputation is created through the evaluation of previous actions by individuals and organisations and can function as information surrogate, which in turn enables individuals to trust or mistrust a partner in a transaction. Trust is seen as a means of reducing the complexity of decisions under uncertainty. This study adopted a qualitative research methodology with the aim of exploring what role reputation, but also the similar concept trust, plays in the insurance underwriting and broking process, with a particular focus on the London insurance market. In addition, the consequences for business relationships between underwriters and brokers as a result of a negative reputation were investigated. Another aspect of this research was to find evidence whether the concepts of reputation and/or trust can be considered as heuristics in relation to decision making under uncertainty thus reducing the complexity of decisions. Through the interviews conducted and the web-based surveys there is evidence, albeit inconclusive, that reputation` and trust are part of the decision making process of insurance underwriters and insurance brokers alike. A positive or negative reputation impacts trust and hence impacts business relationships in the London Market. There are also indications that the reputation of brokers influences how underwriters assess the risks presented by brokers. During interviews a number of underwriters stated that they would trust the verbal representations of brokers if they have a positive reputation rather than reading through the entire submission document, which can be quite large. In addition, there is evidence that underwriters might be more inclined to accept new risks from brokers which they believe they can trust. Another conclusion is that the way insurers handle claims significantly influences how brokers place business in the London Market, especially for long-tail business. This highlights the intangibility of the insurance product and hence the need for insurance intermediaries and buyers to rely on reputation as part of the decision making process.

Strategic planning has been used extensively both in the private as well as in the public sector to improve the performance of organisations. This study examines the strategic planning practices carried out in the high-performing banking industry in the Indonesian context. Although the importance of strategic planning, organisational context, and organisational performance has been acknowledged in academic and practitioner literature, only limited studies examine the strategic planning practices and their interrelationship with organisational context, and organisational performance. To the best of the researcher’s knowledge, this is the first study to analyse the issue in the case of Indonesia. A qualitative research approach was adopted as the framework for this study. This study seeks to explore and document the strategic planning practices (changes) in the high-performing banking industry and the role of organisational context to facilitate strategic planning. The data collection method employed in-depth semi-structured and unstructured interviews of both key informants (managers, heads of planning departments, and planning members) as well as non-planning members in each identified organisation. Documents were analysed to validate and add to the interview data. The research was carried out between May 2011 and February 2012 for the first period of data collection and during September 2012 to the end of October 2012 for the second period of data collection in six high-performing banks in Indonesia. The six banks were selected because of their engagement in strategic planning and their high performance status. Research reports from a panel of industry experts were used to first define a bank as high performing in the first instance, and then to select the six highest performing banks for the study. The field data were collected and then analysed using the six steps suggested by Creswell (2009). A systematic approach as recommended by Braun and Clarke (2013), Saunders et al. (2009), and Yin (2009), and Opperman et al. (2013) was also utilised for identifying, analysing, and describing patterns and themes across a dataset to enrich steps suggested by Creswell to strengthen and sharpen the data analysis in this case study. This study has provided valuable findings regarding the strategic planning practices in the Indonesian banking industry: key findings include the fact that all six banks in this study have accomplished all the common strategic planning activities presented in this study, the fundamental role of the CEOs in strategic planning has been proven, and managers’ commitment to and involvement in the strategic planning process (particularly managers in the division of strategic planning and planning members) has been identified, among other relevant findings. This study then presented a number of research agenda that need to be dealt with such as: First, future research can replicate this study by investigating across industries including private, government, non-profit organisation, and small medium enterprises to observe whether comparable results can be reached. Second, further research that investigating strategic planning practices across countries is needed. Third, formal strategic planning systems in which flexibility was limited had led the banks to high organisational performance. Therefore, further empirical research is needed that seek to compare each planning approach against organisational performance in relatively stable business environments.

This thesis centres on capital structure, corporate cash holdings, and dividend policy in African countries. Three different areas of research are followed and, employing different estimation techniques and methods, this thesis offers the following results: Firstly, the leverage trends across the countries are very low and stable, with country and firm specific factors playing a significant role in determining the level of leverage. Secondly, corporate cash holdings in the countries are significantly determined by the firm level factors with stable trends. Thirdly, dividend payers are more profitable, have larger firm size, greater investment, high retention of earnings and less financial leverage than non-paying firms. In countries where GDP is low, firms are likely to pay dividends, and non-payers of dividends have high levels of corruption. Country and firm factors are significant in determining dividend. The thesis makes the following contributions to the literature: First and foremost, the dataset used covers a much longer period and a larger sample of African firms. Secondly, there is a cross-country comparison, which is rare in most previous studies. Also, both firm and country specific factors were considered when determining the relationships. More importantly, the thesis is the first research to confirm that Pecking order and Trade off theories are robust vehicles for explaining differentials in capital structure and corporate cash holdings in Africa. In conclusion, this thesis provides the following public policy recommendations: Governments should strengthen their institutional frame-works for good governance and rule of law, and support the capital and stock markets to attract investment, and also have a positive effect on business and industry. They should also ensure efficient management of the banking sector operations in order to reduce the interest rate by reducing inflation, and encourage domestic savings and their sustainability, thereby boosting the financing of firms and private sector development to create more job opportunities and growth. Finally, policy makers need to set up special funds which firms can tap into for research and development, to develop innovative ideas, introduce policies against political instability, corruption and political manipulation, to ensure total economic growth.

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