In an attempt to understand the performance measurement systems, this study utilises the contingency theory theoretical framework to examine the contingent relationships between several contextual factors and the usage of financial and non-financial performance measures for performance measurements and evaluation purposes. The contextual factors consist of business strategy, organisational structure, perceived environmental uncertainty, intensity of competition, organisation size, total quality management and just in time manufacturing approaches. This study also investigates the implications of fit (internal consistency) between the above contextual factors and the extent of performance measurement diversity usage on organisational effectiveness (i.e. organisational performance and level of satisfaction). Nine performance measurement categories are investigated including: financial, customer, operational, innovation, employee, supplier, environment, quality and community categories. During the 1990s and until recently, considerable publicity and interest has been given to the balanced scorecard approach (BSC). This study also gathers empirical data to investigate various issues relating to BSC approach. The major aims of the study are to examine how the manufacturing companies are dealing with this approach and to determine the extent to which the above contextual factors influence the extent of balanced scorecard usage. The findings are based on a questionnaire mailed to a target sample of 900 UK manufacturing companies with an annual sales turnover in excess of £50 million. A total of 163 usable responses were received representing a response rate of 19.7%. For the purpose of data analysis, the study utilises descriptive statistics and multivariate statistics (i.e. structural equation modelling using EQS 5.7 and multiple regression). The results of the descriptive analysis show that financial, customer, operational and quality performance categories are extensively used for performance measurements and evaluation purposes. Other non-financial performance categories (i.e. innovation, supplier, employee, and environment) are also used but to a lesser extent. Despite the popularity of the balanced scorecard (BSC) approach, only a minority of companies (30%) reported using it in their performance measurement systems. The findings also emphasise the inconsistency between companies following the BSC approach, particularly the number and types of perspectives used. The results of structural equation modelling suggest a strong support for the cost strategy, formalisation, regulatory aspects of perceived environmental uncertainty, size, aspects relating to the intensity of competition and the extent of the use of both total quality management and just in time manufacturing approaches have a significant influence on the extent of performance measurement diversity usage (i.e. financial and non-financial performance measures). The results also indicate that the different approaches to fit utilised in this study (i.e. bivariate and systems approaches), based on structural equation modelling, result in insightful findings relating to the contingent relationships between the anticipated contextual factors, the extent of performance measurement diversity usage and organisational effectiveness. The results using multiple regression indicate that formalisation, raw material aspects of perceived environmental uncertainty, size and the extent of the use of total quality management significantly influence the extent of balanced scorecard usage. A distinguishing feature of this study is that it extends previous BSC studies in determining the extent of balanced scorecard usage. The results suggest that using financial and non-financial performance measures does not necessarily imply that the companies are really balanced scorecard users. This finding therefore raises implications for future balanced scorecard researchers, and by drawing off contingency theory literature, it overcomes some of the deficiencies of previous research relating to balanced scorecard approach. Finally, this study contributes to the literature by utilising the structural equation modelling method, which has several advantages over other multivariate data analysis.

This research study aims to explore the current practices, policies and roles of training and development (T&D) within Jordanian banking organisations. It is an exploration of all the issues concerning T&D practices in terms of how the T&D process is conducted (how training needs are assessed, how T&D is delivered and how T&D programmes are evaluated); exploring top managers', T&D and HRM personnel's attitudes towards the importance of T&D in improving employees and organisational performance and the strategic position and roles of T&D in their organisations. This study aims to investigate all the problems and challenges that face T&D activities and searches for practical suggestions to improve the effectiveness of these activities. Finally, it aims to contribute to the understanding of HRD in differing cultural contexts. This research is mainly focused on top managers', T&D and HRM attitudes and viewpoints (perception) towards the research objectives. The research has adopted a multi-methods approach. The data were gathered through a combination of semi-structured interviews with 15 top managers and a survey questionnaire addressed to the persons responsible for T&D within the targeted organisations. All Jordanian banking organisations were targeted in this study rather than a representative sample of these organisations; however, a purposive sampling strategy was used in choosing the participants of this study. In total, 15 top managers and 38 T&D and HRM managers took part in the study. The study reveals that, in the majority of the organisations, there is an absence of systematic employee training needs assessment and of effective procedures for evaluation. The banks prefer to send their employees to external training providers rather than train them in the banks. The most commonly used delivery method is off-the-job training, namely lectures, seminars and case studies. T&D is not characterised by strategic human resource development criteria (SHRD) and it plays a reactive rather than a proactive role in these organisations. T&D improves employees' skills, knowledge, attitudes and behaviour, but it does not increase employees' commitment and satisfaction. Also, T&D does not impact on profit, innovation and change, sales, absenteeism, turnover rate, job satisfaction and cost saving in their organisations, but it increases customer satisfaction, quality service and productivity. T&D faces many problems: lack of motivation among employees to attend T&D programmes; inaccurate TNA processes; poor training planning in terms of contents and delivery methods; sending inappropriate persons to the training programmes and lack of on-the-job training. To improve T&D effectiveness the researcher recommends many actions and decisions which need to be undertaken, as shown in sections 6.10,7.6 and 8.2.4. Finally, this study contributes to knowledge on the academic and practical levels as one of the first attempts at empirically investigating the nature and the extent of strategic T&D activities in Jordanian banks, identifying the main concerns and problems which face T&D activities, in addition to recognizing the vital roles of T&D in improving the organisations' performances. Thus, it raises the general understanding of the current T&D practices and management in Jordanian banks. It has brought together a large body of knowledge in management T&D, T&D in Arab countries, strategic T&D and T&D and performance relevant literature and unifies diverse schools of thoughts into one integrative perspective. This research integrates, refines and extends the empirical work conducted in the field of T&D in developing countries, since there is a lack of such studies. It raises some of the implications for managers and consultants, such as considering employees' motivation, enthusiasm and willingness, T&D time, the importance of incentive reward when managing T&D. This study provides useful guidelines in the form of the critical elements and factors that can enhance success in T&D in terms of TNA, training implementation, methods and evaluation process. The study also proposes several directions for future research.

Auditing has grown considerably recently but this growth has not been impeded by steady criticism, misgivings and discussions concerning the worth of the auditing function and audit report communication. A great deal of such criticism and discussion typically emerge following major financial scandals and company collapses such as the crash of Enron, Arthur Andersen, not only in countries that suffered from such corporate collapses, but also in countries that have never experienced such crises. This criticism is attributed to the fact that this serious problem is referred to as the “Audit Expectation Gap”. Consequently, the “expectation gap”, has been investigated by various scholars in order to examine its occurrence in numerous countries such as the USA and the UK; nevertheless, the scope of such gap has not been explored in many emerging economies such as that of Libya. The main aim of carrying out this research study is to explore and examine the development and current state of auditing in Libya, and the possible existence of an expectation gap in auditing in economic transition conditions in one of the less developed countries, namely Libya. To realise the research objectives and to respond to the research questions, mixed research methods were applied. A questionnaire was conducted with the general auditing bureau, private auditors, financial statement preparers, lenders and private investors, aimed at investigating the existence of an audit expectation gap and the effectiveness of audit report communication in Libya. 270 questionnaires were gathered. The questionnaires were followed by 15 semi structured interviews to gain an understanding of the gap the reasons behind the existence of an audit expectation gap. The outcomes of this study reveal that the Libyan accounting and auditing framework is not properly developed. Furthermore, the study demonstrates that the lack of the accounting and auditing principles has resulted in flaws in the accountability and responsibility of external auditors. Moreover, the findings of both the questionnaire and the interviews evidently indicate that the audit expectation gap (which contributes to the reasonableness gap and deficient standards gap) exists in the Libyan private sector with respect to a certain number of auditing issues. These encompass auditors and the auditing process, audited financial statements, and the audited company, together with prohibitions and regulations in the audit milieu. Also, an expectation gap (a deficient standards gap) was detected especially related to the purpose of an audit, the responsibility factor, assurance of future feasibility, and the utility of decision making processes. On the other hand, it is proposed that the present audit report is not a wellunderstood document whereas it is surprising to find out that one of the unqualified audit report communication factors examined in this study – the reliability of the financial statements – appears obviously to be communicated in the audit report; both groups were unsure pertaining to this matter as – on average – their responses displayed uncertainty’ relating to the reliability issue. These findings have significant implications for the Libyan Authorities regarding the actions that should be considered to bridge the gap. Reducing the gap may need to develop the Libyan auditing profession and increase the utility of the audit report as the main source for taking investment decisions.

This thesis contains four essays that examine the relationships among risk disclosures, multi-level governance, credit ratings, and bank value in the Middle East and North Africa (MENA) banks. These essays concentrate on four closely linked risk disclosures, and governance topics that quantitatively investigate the antecedents and informativeness of risk disclosures by banks from 14 countries in MENA region over the 2006–2013 inclusive period. The first essay aims at investigating the impact of multi-layer governance mechanisms on the level of risk disclosures by banks. The essay result suggests a variation between MENA banks in the level of risk disclosures with a significant improvement from 2006 to 2013. Specifically, the findings are three-fold. First, the results suggest that Sharia Supervisory Board (SSB) is positively associated with the level of risk disclosures by banks. Second and at the bank-level, the essay finds that ownership (governmental ownership and family ownership) and board (board size and non-executive directors) structures have a positive effect on the level of risk disclosures by banks, whilst CEO duality is negative, but insignificantly related to bank risk disclosures. At the country-level, the evidence suggests that control of corruption has a positive effect on the level of bank risk disclosures, whilst political stability and absence of violence have a negative, but insignificant association with the level of bank risk disclosures. In the second essay, the thesis investigates the relationships among national governance quality (NGQM), Islamic governance quality (ISGQ), including other bank-level governance mechanisms, and risk management and disclosure practices (RMDPs); and consequently ascertains whether NGQM has a moderating influence on the ISGQ -RMDPs nexus. The findings are four-fold. Firstly, this study finds that RMDPs are higher in banks from countries with higher NGQM. Secondly, this essay shows that RMDPs are higher in banks with better Islamic governance. Thirdly, the study finds that board size and non-executive directors have a positive effect on the level of RMDPs. Finally, this study finds evidence that suggests that NGQM has a moderating effect on the Islamic governance quality-RMDPs nexus. The third essay explores whether RMDPs have a predictive effect (informativeness) on banks’ credit ratings (BCRs); and consequently ascertains whether governance structures can moderate such an association. The findings suggest that RMDPs have a predictive effect on BCRs. The study finds that the quality of the BCR is higher in banks that have higher risk disclosures, board size, government ownership, board independence, women directors and established SSB. On the other hand, the results indicate that the BCR quality is lower in banks that have higher foreign ownership, and CEO role duality. Furthermore, the findings suggest that governance structures moderate the relation between RMDPs and BCRs. The final essay examines the extent to which RMDPs and multi-level governance can explain observable changes in bank value in a number of ways. First, this essay seeks to examine whether RMDPs can influence the value of banks. The second objective is to examine how NGQM may affect the bank value. Finally, this essay explores the relationship between operating in better- or poorly-governed countries and the market value of banks. The results confirm the substantial role of risk disclosures and multi-level governance in improving bank valuation in MENA. More specifically, the results indicate that market valuation is higher in banks with bigger foreign ownership, board size, board independence, Islamic governance, and NGQM. The results also show a significant negative relationship between CEO power and bank value. The research’s empirical findings are largely in line with the predictions of the multi-theoretical framework that incorporates insights from agency, signalling, legitimacy, institutional, and resource dependence theories. The study findings are robust to alternative firm- and country-level controls, alternative multi-level governance mechanisms, risk disclosure proxies, alternative estimation techniques, and endogeneity problems. In doing so, this study extends, as well as contributes to the banking and governance literature in a number of ways. First, to the best of the researcher’s knowledge, this thesis provides a first-time cross-country evidence on the level of risk disclosures in MENA countries, especially following the 2007/08 financial crisis in the banking industry. Second, this thesis offers first-time evidence on the informativeness of Islamic governance quality and risk disclosures from equity and debt markets. Third, this thesis offers evidence and extends prior research on the influence of multi-level governance on bank value, and credit ratings, using a multi-theoretical framework. Fourth, the study offers first-time evidence on the effect of national governance quality on banks’ risk disclosures, credit ratings, and bank value.

With the existence of loopholes in the accounting rules, firms have been able to keep many assets and their corresponding debt off the balance sheets, thus, hiding the true value of debt and firm financial risk (Ketz (2003), Franzen et al. (2009) and Koller et al. (2010)). Graham and Leary (2011) point out that one of the noticeable gaps in the capital structure research area is the mis measurement of leverage when off-balance sheet financing is excluded. Therefore, this thesis bridges the mis-measurement gap by adjusting leverage for three important off-balance sheet debt equivalents and two on-balance sheet ones. Moreover, this study investigates the relationships between asset redeployability, top-management compensation and both adjusted and non-adjusted leverage as well as examines whether these on and off-balance sheet debt equivalents are reflecte in credit risk measurements. Focusing on large US firms from 1996 to 2010, my results show that the off-balance sheet debt equivalents account for significantamounts over total reported debt. Also,there is a considerable gap between reported debt and adjusted debt for debt equivalents, and this gap seems to increase sharply over time. I suggest that these debt equivalents should be considered carefully; otherwise, firms' financial health can be misinterpreted. In addition, I document different results for adjusted and non-adjusted leverage which indicates that existing theories related to the conventional capital structure might not be able to give the same explanations to the adjusted one. Moreover, credit risk measurements do not incorporate all of these debt equivalents in their credit risk assessments; which implies that the market may not be fully aware of the importance of these debt equivalents.

The classical Black-Scholes analysis determines a unique, continuous, trading strategy which allows one to hedge a financial option perfectly and leads to a unique price for the option. It assumes, however, that there are no transaction costs involved in implementing this strategy, and the stock market is absolutely liquid. In this work some new results are obtained to accommodate costs of hedging, which occur in practice, and market imperfections into the option pricing framework. In Part One transaction charges are dealt with by means of the mean-variance technique, originally developed by Markowitz. This approach is based on the minimisation of the variance of the outcome at expiry subject to spending at most a given initial endowment. Since "perfect" replication is no longer possible in this case, there will always be an unavoidable element of risk associated with writing an option. Therefore, the option price is now not unique. A mean-variance approach makes option pricing relatively easy and meaningful to an investor, who is supposed to choose a point on the mean-deviation locus. In the limit of zero transaction costs, the problem naturally reduces to the Black-Scholes valuation method, unlike alternative approaches based on the utility-maximisation. The stochastic optimisation problem obtained is dealt with by means of the stochastic version of Pontryagin's maximum principle. This technique is believed to be applied to this kind of problem for the first time. In general the resulting free-boundary problem has to be solved numerically, but for a small level of proportional transaction costs an asymptotic solution is possible. Regions of short term and long term dynamics are identified and the intermediate behaviour is obtained by matching these regions. The perturbation analysis of the utility-maximisation approach is also revised in this work, and amendments are obtained. In addition, the maximum principle is applied to the Portfolio Selection problem of Markowitz. The dynamical rebalancing technique developed in this work proves more efficient than the classical static approach, and allows investors to obtain portfolios with lower levels of risk. The model presented in Part Two is an attempt to quantify the concept of liquidity and establish relations between various measures of market performance. Informational inefficiency is argued to be the main reason for the unavailability of an asset at its equilibrium price. A mathematical model to describe the asset price behaviour together with arbitrage considerations enable us to estimate the component of the bid-ask spread arising from the outstanding information. The impact of the market liquidity on hedging an option with another option as well as the underlying asset itself is also examined. Although in the last case uncertainty cannot be completely eliminated from the hedged portfolio, a unique risk-minimising strategy is found.

Nominal exchange rate stability has long been considered as a policy choice for many oil-exporting economies, including the GCC countries. The main motives for such policy choices include the desire to import credibility to domestic currencies, stabilize oil revenues and in turn government revenues (given their role in fiscal budget of these oil-based economies) and to avoid Dutch disease, particularly for those countries which have been trying to promote their non-oil exports. Recently however, with respect to the GCC countries, the advantages of exchange rate stability/peg have been overshadowed by adverse domestic and global developments. The recent surge in the GCC countries’ inflation rates that coincided with depreciation of the currencies of these countries due to the depreciation of the US dollar, has led to increasing public pressure for an upward revaluation or even a de-peg from the US dollar to an exchange rate regime that will ensure higher price stability. Accordingly, this thesis was put forth to provide a scientific opinion of the viability of the existing US dollar peg in the GCC countries, by focusing on the link between changes in exchange rate and inflation. To this end, the study attempted to assess the risk to the domestic inflation rates of the GCC countries arising from fluctuations of the US dollar against the currencies of the major trading partners of these economies. Based on a thorough review of the relevant literature, some empirical estimations were carried out using some econometric methods, and it was discovered that the amount of pass-through or impact from changes in exchange rates to inflation rates in the GCC economies is incomplete and moderate, with an average of around 23% in the long-run. Furthermore, an average long-run pass-through of around 23% does not signify a high risk from fluctuations in the foreign exchange market for domestic prices in the GCC countries. In other words, the volatility of exchange rates of the currencies of the GCC countries does not necessitate the adjustment of the money supply in these economies. These findings lent further support to the relevancy of the existing fixed exchange rate regime for maintaining stable inflation in the economies of the GCC countries. The findings were also supported by the performance of the GCC economies over the past two decades, despite some periods of dollar fluctuations. A retrospective analysis indicates that on average, inflation has been stable in the region over the past two decades. The study provided evidence for the important role of the fiscal policies of the GCC countries in affecting the recent impact from exchange rate to inflation rate in these economies, which suggests that these policies form a key macroeconomic tool in these countries, particularly ii given the lost independence of the monetary policy under the existing pegged exchange rate regimes. Moreover, the study suggests lowering the influence of fiscal policies on the link between exchange rate and domestic prices, or inflation in general, in the GCC countries by pursuing gradual steps toward domestic development in the economy, particularly given the limited absorptive capacity of these economies due to the shortage in supply bottleneck. The study was also extended to identify the potential alternative exchange rate regime if the GCC changed their focus from inflation to other, evolving, national objectives like international competitiveness. Based on the existing literature and the optimum currency theory, the study suggests that the GCC countries should consider moving gradually from their current single peg toward a more flexible exchange rate in order to avoid abrupt change that would disturb the existing market credibility. As an initial step, the study recommends moving toward a basket peg of two currencies, namely the US dollar and the Euro, that account for a large share of the GCC economies’ international trade and non-trade financial transactions. Finally, the study also concluded that an upward revaluation as a remedy for the recent inflationary development is an unsatisfactory solution, particularly if the same set of circumstances continued into the future. If this was the case, then the process would have to be repeated again, thus triggering the possibility of speculation attack.

The breakdown of the Bretton Woods system and the adoption of generalized floating exchange rates ushered in a new era of exchange rate volatility and uncertainty. This increased volatility led economists to search for economic models able to describe observed exchange rate behaviour. In chapter 2 we propose more general STAR transition functions which encompass both threshold non-linearity and asymmetric effects. Our framework allows for a gradual adjustment from one regime to another, and considers threshold effects by encompassing other existing models, such as TAR models. We apply our methodology to three different exchange rate data-sets, one for developing countries, and official nominal exchange rates, the second emerging market economies using black market exchange rates and the third for OECD economies. The large appreciation and depreciation of the dollar in the 1980s stimulate an exciting academic debate on using unit root tests for structural break. We propose a model which is the natural extension of the behavioural equilibrium exchange rate (BEER) model. We then propose more general smooth transition (STR) functions, which are able to capture structural changes along the equilibrium path, and are consistent with our economic model. Our framework allows for a gradual adjustment between regimes and considers under- and/or over-valued exchange rate adjustment. We apply our methodology to the monthly and quarterly nominal exchange rates for seventeen and twenty OECD economies and construct bilateral CPI-based real exchange rates against the U.S. dollar and the German mark. The investigation of chapter 4 focuses on non-linear forecasts to testing exchange rate models by examining microstructure - order flow. The basic hypothesis is that if order flow includes heterogeneous beliefs and the information contained in them, heterogenous customer order flow can have forecasting power for exchange rates. Using statistical and economic evaluation, we quantify the role that, when the information is lagged or simultaneously released to all market participants, the key micro level price determinants - order flows is impounded into price. The results indicate: 1) order flow with non-linear consideration lead to considerable and statistically significant improvements compared to the random walk model; and 2) order flow is a powerful predictor of the exchange rate movement in an out-of-sample exercise, on the basis of economic value criteria such as Sharpe ratio and performance fees implied by utility calculations.

This thesis discusses the adaptation and convergence in corporate governance to international norms in Pakistan. Pakistan is an underdeveloped but an emerging market with inefficient legal, regulatory, judicial, institutional and governance norms. In recent times there have been some reforms in the corporate sector of Pakistan but lack of infrastructure and a dearth of research were barriers to reform generally. Therefore, this thesis seeks to identify corporate governance issues in Pakistan, and discusses analytically the possibility and effectiveness of convergence in corporate governance to international norms in Pakistan. To this end, it focuses on three aspects of convergence in corporate governance in Pakistan. First, it discusses the prospects and application of convergence in corporate governance in Pakistan. Second, it analyses critically, from a comparative perspective, three core corporate governance issues in Pakistan. The corporate sector in Pakistan is highly concentrated with an underdeveloped capital market and inefficient enforcement mechanisms. The conflict between shareholders and management, and shareholders inter se are major issues of corporate governance in Pakistan. The former conflict is addressed by reducing agency cost and the latter by ensuring minority protection. These conflicts are analysed comprehensively through comparative studies. Furthermore, the market and judiciary in Pakistan have failed to provide investors with protection. This thesis discusses the reform process in the market and judiciary in order to improve enforcement mechanisms. In addition, it discusses the possibility of convergence and effectiveness of adaptation in these issues. Third, as Pakistan is an ideological country whose constitution prescribes Islam as the state religion which, in turn, prescribes Islamic injunctions as basic norms, convergence to any foreign corporate governance feature will have to pass the litmus test of Islamic norms. Therefore, the thesis also identifies the possibility of filtration of foreign governance features through Islamic norms. The thesis concludes that the corporate sector in Pakistan is underdeveloped with weak investor rights and enforcement mechanisms. There is, therefore, a need to enhance investor protection in order to improve corporate governance which, in turn, will improve the economy of the country. In addition, the conclusion is reached that in convergence to Western corporate governance features in Pakistan, Islamic norms may act as a litmus test which may not be as problematic as it appears at first sight.

This thesis decomposes the UK market volatility into short- and long-run components using the EGARCH component model and examines the cross-sectional prices of the two components. The empirical results suggest that these two components are significantly priced in the cross-section and the negative risk premia are consistent with the existing literature. However, the ICAPM model in this paper using market excess return and two volatility components as state variables is inferior to the traditional three-factor model. Therefore, investor sentiment is augmented to the EGARCH component model to analyse the impacts of sentiment on market excess return and the components of market volatility. Bullish sentiment leads to higher market excess return while bearish sentiment leads to lower excess return. The sentiment-augmented EGARCH component model compares favourably to the original EGARCH component model which does not take investor sentiment into account. The sentiment-affected volatility components are significantly negatively priced in the cross-section. This paper explores the cross-sectional impacts of market sentiment on stock returns and reveals that the sensitivities of investor sentiment vary monotonically with certain firm characteristics in the cross-section. The analysis suggests that investor sentiments forecast the returns of portfolios that consist of buying stock with high values of a characteristic and selling stock with low values. A sentiment risk factor is constructed to capture the average return differences between stocks most exposed to sentiment and stocks least exposed to sentiment. The two-stage Fama-MacBeth procedure suggests that the sentiment risk factor is significantly priced in the cross-section.