Investment returns of European venture capital (VC) funds have consistently underperformed US VC funds. This has led to reduced allocations of funds raised for European venture from traditional institutional investors and consequently less finance available for investment into high-growth entrepreneurial companies in Europe. The aim of this study is to investigate the factors that may give rise to a performance difference between European and US VC funds in the attempt to explain the reasons for the gap in performance. Potential factors are structural resulting from characteristics of the funds themselves, operational such as the investment practices of the VC firms which manage the funds and wider environmental such as culture and attitude to risk and the wider ecosystem in which the funds operate. The characteristics of the better performing funds in Europe and US are also investigated. Previous studies offer incomplete explanations on the reasons for the difference in performance. Studies have focused on the UK in comparison to US and have not included continental European funds. There are no studies that have reviewed the entire investment process from sourcing deals to exiting deals, specifically contrasting Europe and the US in the context of the variables pertaining to the investment process and the impact on the fund performance gap. Previous studies have been largely quantitative in approach and influences that cannot be quantified, such as the cultural dimension, are therefore not captured in the analyses. The study engages a critical realist philosophy and embraces an engaged scholarship, qualitative approach with some 64 semi-structured interviews with separate VC firms in UK, continental Europe and USA and 40 interviews with other stakeholders from those geographies who are related to the VC industry, including limited partner investors, entrepreneurs and advisors. Key findings of the research are that US VC firms have proportionately more partners with operational and entrepreneurial backgrounds than do European firms, they use a theme approach to identify future areas for investment, pursue a “home run” investment strategy, do most of their due diligence in house, have entrepreneurially friendly terms in their term sheets and are more proactive in achieving optimal exits for their investments than European VCs. The research has had impact in that the findings have been shared and discussed with the UK professional VC association.

Mutual fund is a burgeoning business in not only US but the world. There is a growing tendency that participations of individual investors in financial market are migrated to mutual funds, an indirect channel to invest. Thus, the flows to and out of mutual funds, once a neglected topic, are becoming a new field for financial study. The primary instrument and subject of my PhD is mutual fund flows. Mutual fund flows have special merits for academic research. Firstly, it is purely driven by demands but not supplies, as the supply elasticity of mutual fund is nearly infinite. The characteristic reveals investor behaviours and decisions in a mass scale. Traditional instruments for behaviour studies relies on asset prices and volumes, which are less exogeneous as they are driven by both demand and supply. Secondly, mutual funds specify their objectives and asset classes in prospectus. The characteristics help us understand how investors respond to changing market conditions by changing their exposures on asset classes or styles. Thirdly, a majority of individual investors in mutual funds (as suggested by ICI statistics) provides a natural field for behavioural finance. Fortunately, data is available not only at aggregated level, but also individual and account level, which serve as a great supplement to the existing studies using trading data. The second chapter is based on a simple hypothesis: if flows are (rationally) responding to fund performance, what information does the flow-performance sensitivity convey? How flow, a measure of actual fund investor trading decisions, helps us decompose and finely measure the outcome of these investors? The study is based on several established papers on flow performance relationships in mutual fund market. Warther (1995) is a pioneer paper that discovers a significant correlation between flows and performance. Sirri and Tufano (1998) discovers a convex-shaped flow-performance function and attributes the cause to asymmetrical information. Berk and Green (2004) established a model in which investors trade against good performers and against bad performers but funds themselves suffer from diseconomy of scale. As the fund change in size, it deviates from optimal portfolio size and IV result to better or worse performance. Huang, Wei and Yan (2012) argues that flow performance sensitivity is a rational investor learning process. Based on their arguments, I obtain a simple but effective proxy for investor sophistication: the sensitivity of flows to recent (abnormal) performances. To granularly measure their respective performance, I decompose their performance into three aspects: abnormal returns, fees and timings, a scheme proposed in Fama (1972). The abnormal return is alpha on a four-factor model, which is a traditional before fee, relative measure of whether a fund has beat the market. Fee selection takes into account the average fees that jeopardize the performance and timing cost is measured by “performance gap”, a concept used in Nesbitt (1995); Dichev (2007); Friesen and Sapp (2007); Bullard, Friesen and Sapp (2008). The result is that sophisticated investors earn higher risk adjusted returns and avoid high fees. In addition, investors’ timing performance can be greatly improved by trading less, with the most significant improvements seen on most sophisticated investors. The research question in third chapter is: is there a calendar effect for flow-performance relationship? Does the shape of the function change across the months and what drives the change? The study fills the gap by emphasizing several exogeneous factor of flow-return relationship such as portfolio rebalance and tax-loss selling which interact with calendar dates. Previous literature commonly finds a convex function. Chevalier and Ellison (1997) is first to document the convexity and they argue the convexity may incentivize agency problems. Sirri and Tufano (1998) explained using information search cost and Lynch and Musto (2003) explained with survivalship bias of mutual fund strategies. However, all the study examines only average shape of the flow-performance function. None of them attempt to tackle calendar effect. Calendar effect is potentially a strong determinant of flow performance relationship. Factors such as tax-loss selling (Constantinides (1983)), portfolio rebalance, disposition effect (Kaustia 2011)) and seasonal variation in risk appetite (Kamstra et al. 2017) may interact with dates and change the flow-performance relationship. In this study, I conduct a similar flow-performance regression for each month. The regression is piecewise which separates the sensitivity of mutual fund flows to returns into five parts. I also construct a concise measure of whether a group of funds are bought or sold at any time during the year to disentangle several confounding effects. I find that the shape of the function does change throughout the year and they are affected by tax-loss selling and portfolio rebalance. In fourth chapter, I focus on a special group of funds, the leveraged funds, which mainly caters for day traders. The research question is whether their flows reflect market wide sentiment. Leveraged funds are funds that allows investors to bet on daily performance of stock indexes with leverage and direction. As these funds track only daily index returns and investment horizon longer than one day will result to material deviation from index returns, these funds are unlikely used by mid- or long-term optimizers. As common study suggest too much trading can be harmful (Barber and Odean 2000), I notice that the flows for these funds may be sentiment driven. In this study, I obtain daily flows of nearly 100 largest leveraged funds trading in US and extract the first principal component from these funds. In addition, I follow Baker and Wurgler (2006a) to construct a daily sentiment index (the alternative sentiment measure) from several market variables, which are purposely chosen to be unrelated to fund markets. I find that the first component from leveraged funds is associated with investors’ migration between bull and bear funds and it has strong correlation with our alternative daily sentiment measure. In a later test, the two sentiment measures have similar price impact as a hypothetical sentiment measure would have. I have also examined the limits of arbitrage effect proposed in Shleifer and Vishny (1997). The sentiment component predicts similar cross-section of price revision for up to 7 days into future.

This thesis examines the impact of competition and earnings management on bank earnings persistence by exploiting natural experiments (IBBEA and SOX). Chapter three examines how competition affects bank earnings persistence by exploiting a natural experiment following interstate banking deregulation that increased bank competition. We find that bank earnings adjustment speed (which equals one minus earnings persistence in partial adjustment model) increases after their states implement this deregulation. We find the impact from the competition on earnings persistence is solid and consistent using Lerner index as bank-level competition measure and a battery of placebo tests. Despite the negative impact of competition on profit persistence, we didn’t find any peculiar situation that alleviates or strengthen this tie(regarding profitability, Gaps). Chapter four examines the impact of earnings management on earnings persistence in US banking industry. Results show earnings management have a positive influence. In addition, statistics illustrate managers are more willing to keep a high persistence of profit when they are outperformed than the expected to return. However, when it comes to the different timing of outside market, the effect of earnings management on profit persistence might vary significantly. This connection is robust by using SOX as an exogenous shock on financial reporting quality of the largest banks. Chapter five analyze the economic significance between earnings management and competition on earnings persistence. We use a battery of tests to determine the most important factor to earnings persistence. We also introduce investment sentiment as an exogenous variation of market vitality to see how bank profit persistence changes. We find both competition and earnings management have a significant impact on profit persistence. We also discover that competition would increase earnings management. Then, if higher competition reduces earning persistence and increase earnings management. While we also observe that higher earnings management would increase earnings persistence. Therefore, we conclude that the effect of the competition on earnings persistence is not from earnings management. Furthermore, we find that competition impacts on earnings persistence is strong enough to overcome the marginal effect that boosted from earnings management due to high competition. We additionally found that earnings management is sensitive to investment sentiment.

The thesis is a collection of three separate papers on accounting consequences. Specifically, the papers examine the relation between accounting and employment, risk and valuation. The first chapter (solo-authored) documents that approximately 20% of large US public firms choose to disclose employment information quarterly, at a higher frequency than mandated by the US Securities and Exchange Commission (SEC). I use these voluntary disclosures to examine whether managers modify their firms' workforces to manage earnings. Using firm-level analysis, I find that managers alter their firms' workforce in the short-run to meet financial reporting benchmarks. I separately investigate the decision to voluntary disclose employment information more frequently than mandated by the SEC. I show that providing quarterly employment disclosures is associated with managerial myopic behavior. Overall, in the first chapter I present evidence that more frequent disclosures of workforce information provide valuable insights into firm operations and managerial decisions. I demonstrate that financial measures may govern decisions regarding real resource allocations, specifically, the firm's workforce size. The second chapter (co-authored with Brian Burnett and Paige Patrick) investigates the effect of adopting more principles-based standards on litigation risk. A common perception is that principles-based accounting standards, such as International Financial Reporting Standards (IFRS), allow for more managerial discretion over financial reporting. This suggests that adopting principles-based standards may alter the litigation risk exposure of companies and their directors and officers. We study changes in litigation risk in Canada following IFRS adoption in 2011. Canada switched its reporting standards from Canadian Generally Accepted Accounting Principles (GAAP) to IFRS, which is considered more principles-based. We examine the effect of IFRS adoption on litigation risk using two established proxies for litigation risk: Directors' and Officers' (D&O) liability insurance, which Canadian firms are mandated to disclose, and excess cash holdings. We document that more principles-based accounting standards reduce litigation risk and provide evidence for a benefit of adopting such standards, in the form of lower insurance premiums. The third chapter (co-authored with Bjorn Jorgensen) develops an accounting-based valuation model for an economy with multiple firms and demonstrates the effect of crossholdings on firms' prices. We illustrate how market values appear distorted when firms have mutual minority interest equity investments. We discuss possible empirical implications for valuation of multiple firms and articulate why corporate equity investments may distort firms' market-to-book ratios. Overall, we show how the accounting treatment for corporate equity investments may alter prices and provide theoretical predictions regarding the mechanism and magnitude of these distortions. We also model linear information dynamics in a setting with multiple firms, allowing for inter-firm information transfers for firms with and without crossholdings. Our analysis illustrates how inter-firm accounting information shape prices. Moreover, we describe possible implications of our model for firms that exhibit variation in reporting dates or reporting frequency.

Directional Changes (DC) is a framework for studying price movements. Many studies have reported that the DC framework is useful in analysing financial markets. Other studies have suggested that, theoretically, a trading strategy that exploits the full promise of the DC framework could be astonishingly profitable. However, such a strategy is yet to be discovered. In this thesis, we explore, and consequently provide proof of, the usefulness of the DC framework as the basis of a profitable trading strategy. Existing trading strategies can be categorised into two groups: the first comprising those that rely on forecasting models; the second comprising all other strategies. In line with existing research, this thesis develops two trading strategies: the first relies on forecasting Directional Changes in order to decide when to trade; whereas the second strategy, whilst based on the DC framework, uses no forecasting models at all. This thesis comprises three original research elements: 1. We formalize the problem of forecasting the change of a trend’s direction under the DC framework. We propose a solution for the defined forecasting problem. Our solution includes discovering a novel indicator, which is based on the DC framework. 2. We develop the first trading strategy that relies on the forecasting approach established above (Point 1) to decide when to trade. 3. We develop a second trading strategy which does not rely on any forecasting model. This is trading strategy employs a DC-based procedure to examine historical prices in order to discover profitable trading rules. We examine the performance of these two trading strategies in the foreign exchange market. The results indicate that both can be profitable and that both outperform other DC-based trading strategies. The results additionally suggest that none of these two trading strategies outperforms the other in terms of profitability and risk simultaneously.

This thesis consists of three essays on investor sentiment and the cross-sections of stock returns. The first essay extends Deling, Shieifer abd Waldman's (1990) noise trader risk module into a module with multiple risky assets to show the asymmetric effect of sentiment in the cross-section. Guided by our module, we also find that the effect of investor sentiment can be decomposed into long and short run components. The empirical tests in the first essay of the thesis present a negative relationship between long-run sentiment component and subsequent stock returns and a positive association between the short run sentiment and contemporaneous stock returns. The second essay explores a previously unexamined sentiment channel through which technical analysis can add value. We construct a daily market TA sentiment indicator from a spectrum of commonly used technical trading strategies. We find that this indicator significantly correlates with other popular sentiment measures. An increase in TA sentiment indicator is accompanied by high contemporaneous returns and predicts high near-term returns, low subsequent returns and high crash risk in the cross-section. We also design trading strategies to explore the profitability of our new TA sentiment indicator. Our trading strategies generate remarkable and robust profits. The third essay focusses on exploring the profitability of trading strategies based on Implied Volatility indicator (VIX) from the sentiment perspective. Our trading strategies involve holding sentiment-prone stocks when VIX is low and sentiment-immune stocks when VIX is high. The shifting asset allocation strategies are based on Abreu and Brunnermeier’s (2003) delayed arbitrage theory and the asymmetric effect of investor sentiment in the cross-section. We find sentiment-prone stock have larger one-day forward retunes following high sentiment and vice versa. Our trading strategies generate substantial higher returns that benchmark portfolios, and the excess returns are not subsumed by well-known risk factors or transaction costs.

This thesis consists of three empirical essays on contemporary issues related to the banking and financial sector, particularly banks’ capital, performance, and financial inclusion. The first essay investigates the determinants of bank capital structure taking into account the impact of the crisis, banks’ systemic size and risks. Using a sample of the European Economic Area’s listed banks over 2005-2014, we find that equity capital is negatively associated with size and positively with profits, market-to-book ratio, dividends, and market return volatility risk; while credit risk does not seem to significantly affect banks’ capital structure decisions. Moreover, we find a positive relationship between equity capital and banks’ reputational risk related to Environmental Social Governance issues. The second essay explores the relationship between financial inclusion and bank performance proxied by a CAMEL-based performance index constructed using principal component analysis. We use alternative measures of financial inclusion, and distinguish between high and low income countries for 131 countries over 2005-2014. Our evidence shows that bank performance is negatively associated with credit deepening and positively with the number of ATMs. However, we find a positive association between different indicators of financial inclusion and bank performance in low income countries. The third essay develops a multidimensional financial inclusion index using principal component analysis for a sample of 95 countries over the period 2004-2015. The financial inclusion index shows an overall progress over the sample period, most markedly in the accessibility and usage dimensions. Examining country-specific factors that explain differences in the level of financial inclusion, we find that higher banking system competition, financial freedom, and capital stringency are associated with higher financial inclusion. Additionally, the level of human development, gender inequality, and education matters greatly in explaining the variation in financial inclusion across countries.

In recent years, a growing literature has emerged that focuses on the performance of volatility indices in the derivatives market. The VIX has been very popular in the US market. Since its introduction in 1993, the VIX is a barometer of investor sentiment and market volatility. However, the VIX is mostly applied to markets that have derivative options price, and it turns out that less or no derivatives market would not be able to utilize the VIX as a benchmark of volatility. Chapters 1 and 2 provide an overview of the thesis and recent developments in volatility literature. Chapter 3 presents the construction of Cross-sectional Volatility Index (CSV) which is applied to an Asian market as an alternative to the VIX. One problem with the construction of a VIX-styled index is that it depends on the price of calls and puts. However, the CSV Index may be applied to measure the volatility when no derivatives market exists. Chapter 4 uses the CSV Index model to approach the no derivatives market in Southeast Asian countries. As to validate the CSV Index model, we use the GARCH family and Realized volatility models to explore the predictive power of CSV Index in a non-derivatives market. The results capture symmetric and asymmetric effects on the volatility and yields for better predictive performance. Chapter 5 provides a new empirical methodology for computing a Cross-mixed Volatility (CMV) index that characterizes the country risk understood here as the financial market risk measurement. It encapsulates all the sources of risk stemming from the financial markets for any given country. The Factor-DCC model has been adopted to construct the CMV Index and to build the composite aggregation of the CMV Index. The results exhibited that the commodities were the most prominent contribution of the composition index. Chapter 6 is the conclusion of the thesis.

The main aim of this study was to measure financial capability among university students in Indonesia. However, the study also contributes to: an understanding of the concept of financial capability and how it varies across countries and between groups. The main empirical part of the study was based on a major mixed method design which involved six focus groups followed by a large-scale representative survey of 521 face-to-face structured interviews with students, from Bogor Agricultural University, Bogor, Indonesia. The empirical study provides a wealth of important findings on financial capability among students. Most importantly, it shows that there are different drivers of financial knowledge, attitudes, and behaviour. In particular, the study reveals that a financial education course had an impact on knowledge but not on attitudes and behaviour, once other factors were controlled for. Other factors showed a stronger effect on financial attitudes and behaviour. These were: financial socialisation by family; year of study; and work experiences; and for financial behaviour, the level of income was also a stronger determinant factor. Given that experience was shown as a determinant factor of knowledge, attitudes and behaviour, it is recommended that the financial education courses use experiential learning as a method of delivery to enhance their impact. However, even enhanced financial education courses, on their own, are unlikely to significantly improve financial behaviour. Appropriate provision and regulation of financial services, alongside maintaining adequate income levels are also vital.

While the determinants of low earnings quality (GAAP violation) have been examined in prior research, very few studies have been undertaken in firms with concentrated ownership. Financial reporting in concentrated ownership firms is important because the types of agency conflict shift from the shareholder-agent conflict to the principal-principal conflict (i.e. a conflict between controlling shareholders and outside investors). Against this background, this research aims to reveal the determinants of accounting misstatements in concentrated ownership firms and Thai firms form the basis of the sample. In addition, the research assesses the economic consequences of accounting misstatements – an issue that has received relatively little attention in prior research. A study was conducted of a sample of 51 misstatement firm-years, compared with 2,452 non-misstatement firm-years for the financial reports of public companies listed on Thailand Stock Exchange during 2001-2009. The results indicate that Thai firms are more likely to misstate their financial reports when they are close to debt covenant violations and when they need external finance. Corporate governance mechanisms are also important factors influencing the likelihood of accounting misstatements. The likelihood of accounting misstatements increases when the ultimate owner holds more than 25% of the total shares. The determinants of accounting misstatements coincide with the institutional settings of the country. The study of the consequences of accounting misstatements reveals that misstating firms are more financially constrained than non-misstating firms after misstatement announcements. The net amount of capital supplied by capital providers falls significantly, particularly in the net proceeds from share issuances. The examination of both the determinants and consequences of accounting misstatements extends our understanding on the cost-benefit trade-off in the financial reporting process. The insights from this research might also be applicable to other countries where the country’s institutions are similar to those of Thailand and where ownership concentration is high.