Purpose - The study sought to examine the liquidity linkages between the South African bond and equity markets before the global financial crisis in 2008. Design/methodology/approach: The window of observation covered the period January 2000 to September 2008. In order to ensure robustness in the estimation, the study used foreign participation in the various markets as an additional measure of liquidity. The other liquidity measures considered in the study were volume and value traded of the various securities respectively. Time series modeling techniques were used in the estimation. An unrestricted vector autoregressive (VAR) model was estimated following which the standard innovation accounting techniques, impulse response functions and forecast error variance decompositions were applied. In the empirical analysis, the Granger-causality between the two markets was also used. Findings - While all the liquidity measures suggest the existence of linkages between the bond and equity markets, the direction of causality was found to be unidirectional from equity to the bond market using the volume and value measures. On the other hand, the foreign participation measure of liquidity suggests bi-directional causality. The study also provides evidence of long run relationship between key macroeconomic variables such as inflation, exchange rate and interest rate on one hand and liquidity in the debt and equity markets on the other. As empirical findings indicates that the linkages in liquidity between these markets positive, this consistent with studies conducted by Chordia et al (2003 & 2005) and Engsted and Tanggaard (2000) who found the relationship was a positive one. When volumes of trade and trade values, the study find evidence on uni-directional causality and strong bi-directional causality is evidence when foreign investor participation is used as a liquidity measure. In summary, there is a strong evidence liquidity linkage between the bond and equity market from the empirical results.

This research examines the recent global financial crisis’ (GFC) impact on small- and medium-sized enterprises (SMEs) and analyses governments’ responses. According to most literature, SMEs already faced obstacles prior to the GFC, such as paying high taxes, overcoming low profitability, being affected by rising business costs, finding qualified labour, dealing with increasing competition, etc. The GFC has had serious repercussions for SMEs with respect to financing, markets, and liquidity. In order to explore in depth the governments’ responses, qualitative methods are employed to test the following three research questions: 1) To what extent did governments aim to assist SMEs to survive the GFC? What types of programs have been implemented to address new and existing obstacles? 2) Did governments apply appropriate strategic initiatives to realize their goals? If the initiatives could not achieve the governments’ original goals, what obstacles did they address? 3) Did governments tend to help SMEs more after the GFC? Did governments give up on disadvantaged firms or did they try to help them survive the crisis? Analysis revealed that, as a result of the GFC, governments developed programs aimed at new obstacles and at some of the existing ones. The aims did not differ materially for developed and less-developed economies. Financing and taxation programs tended to be designed to achieve their goals directly, where other programs tended to achieve them in a more indirect manner. Overall, government initiatives covered most of the serious obstacles faced by SMEs and government assistance programs aimed at SMEs tended to have been augmented in light of the GFC.

Recent increases in stock repurchases among U.S. corporations coupled with a historically low cost of debt since the Global Financial Crisis has created media speculation that firms in recent years are paying for their expanding share buyback programs with debt. Repurchasing stock by increasing leverage, instead of using internal funds, implies that managers may speculate on current low interest rate environments at the expense of shareholders. Recent studies find that stock repurchases are associated with reductions in future firm employment and investments such as capital expenditures and research and development expenses. This study expands on prior studies by evaluating how debt-financed stock repurchases affect firm investment, investigating the likelihood of these repurchases in low interest rate environments and assessing the effects on firm value. Results confirm that, in recent years, debt-financed repurchases have increased substantially and the probability of debt-financed repurchases increases in the presence of low interest rates. This relationship is especially pronounced in the years following the Global Financial Crisis. Debt-financed repurchases are associated with small reductions in firm investment; however, these reductions are significantly less after adjusting for industry conditions. Finally, there is little evidence that the method of financing repurchases affects firm value nor does it increase a firm's operating performance.

Thesis (MDF)--Stellenbosch University, 2015. / ENGLISH ABSTRACT: In light of the 2007/2008 global financial crisis, as well as pre- and post-crisis banking reform, this research investigated changes in competitive behaviour among banks in Sub-Saharan Africa, thus adding new insights to the current debate. The main findings from the empirical test were as expected and suggested conditions of monopolistic competition. In order to validate sufficient conditions for observing competition, an empirical test conducted to measure a state of general market equilibrium, had the expected outcome. Specifically, the research methodology applied the Panzar-Rosse model, a non-structural approach in the manner of the New Empirical Industrial Organisation. In the first instance, the model derived a continuous measure of a static H-statistic with a value of 0.57, using 481 bank-year observations from an unbalanced panel of 83 banks from six countries over the period 2008–2013. The H-statistic measured the degree of competition by explaining how changes in market power or unit factor input prices of funds, labour and capital expenditure influenced the pricing output of banks. A computed E-statistic, which was statistically equivalent to zero, validated the significance of the H-statistic, as the result implied that, in equilibrium, market power of a bank does not influence its returns. Overall, the findings were consistent with the pricing and strategy theories, such as contestable markets theory, which indicates that pricing power is associated with neither industry structure nor concentration, but instead with changes in input prices. In addition, the findings were consistent with relevant prior studies, which concluded that banking systems in parts of Europe, Asia, Latin America and Sub-Saharan Africa were monopolistic, and that banking reform influenced market discipline.

This paper applies a cross-sectional regression analysis of 83 countries over the period 2009-11 in order to examine the role played by the exchange-rate regime in explaining how countries fared in terms of economic growth recovery following the recent financial crisis. After controlling for income categorization, regime classification, using alternative regime definitions, and accounting for various other determinants, the paper finds a significant relationship between the regime choice and the recovery performance, where those countries with more flexible arrangements fared better. These results were conditional on the regime classification scheme and the income level, implying an asymmetric effect of the regime during the recovery period between high and low income countries. The paper also finds that proxies for initial conditions as well as trade and financial channels were highly significant determinants of the growth performance during the recovery period.

Magister Commercii - MCom / Since the discovery of herding behaviour in financial markets in the 1990s, it has become an area of interest for many investors, practitioners and scholars. Herding behaviour occurs when investors and market participants trade in the same direction during the same time period, as a result of the influence of other investors. Studies on herding behaviour have been undertaken in both the developed and developing economies and majority of these studies have confirmed the existence of herding behaviour in the stock markets. Despite its tremendous growth, the South African financial markets are not immune to such market anomaly. Herding behaviour on the JSE was first investigated in 2002 focusing in the unit trust industry on the South African stock market. Motivated by this, this study assessed the presence of herding behaviour using the Johannesburg Securities Exchange tradable sector indices. Four indices were employed, namely Financials, Industrials and Resources and were benchmarked against the JSE All Share Index for the period from January 2007 to December 2017. The industrials index ((FINI15) constitutes of 25 largest industrial stocks by market capitalization, the financials index (FINI15) comprises of 15 largest financial stocks by market capitalization, the resources index (RESI10) which represents 10 largest resources stocks by market capitalization and lastly the FTSE/JSE All Share Index defined as a market capitalization-weighted index which is made up of 150 JSE listed companies and is the largest index in terms of size and overall value JSE. The FTSE/JSE All Share Index was used as a benchmark for investors to check how volatile an investment is. The South African economy experienced the effects of the 2008 global financial crisis from 01 July 2007 to 31 August 2009. This study split the examination period into three categories namely before the global financial crises which was the period starting from 1 January 2007 to 30 June 2007, then the period during the global financial crisis which was from 1 July 2007 to 31 August 2009 and lastly the period after the global financial crises which was from 1 September 2009 to 31 December 2017. Apart from the diversity of the indices, the length of the examination period also had a significant influence towards the magnitude of herding behaviour on the JSE.

This paper provides an empirical analysis of the stock price behaviour of firms listed on the Johannesburg Securities Exchange (JSE) around corporate events relating to final cash dividend change announcements over the period 2004 to 2009. Declared for the financial year-end, final cash dividend announcements either represent an increase, a reduction or no change relative to the previous year’s announcement. In this paper we analyse the stock price behaviour of firms that announced dividend reductions before and during the Global Financial Crisis of 2007 (GFC 2007). The pre-crisis analysis focuses on dividend reduction effects on share price during normal economic times and crisis analysis focuses on effects during economic downturn. We refer to the pre and during crises effects as firm-specific and systemic effects respectively. Studies about the general effect of dividend announcements on shareholder value are well documented; however our study is motivated by the fact that there has not been an abundance of forthcoming research in South Africa pertaining to how share prices have reacted to dividend reductions before and during the GFC 2007. We employ an event study methodology in the context of this emerging market to assess the share price behaviour to dividend reductions. Integral to an event study methodology in the corporate context, is the analysis of abnormal performance around the event date. Abnormal performance is measured by employing three widely used quantitative approaches namely, the market-adjusted, market model and the buy-and-hold abnormal return approaches. Based on daily closing share price information collected from iNet Bridge database, abnormal performance is calculated from 2004 to 2009 while controlling for the contemporaneous effect of earnings announcements (earnings data collected from Bloomberg database) occurring within 10 trading days of dividend announcement. The analysis shows that the market reaction is not statistically significant on the announcement day and that more negative returns occur during the pre-crisis period. Volatility of abnormal returns is higher during the pre-crisis period. The research does not support the Irrelevance Theory but seems to support the signalling hypothesis.

This thesis contributes via the concept of efficiency in four distinct fields of the fi nancial economics and banking literature: technological heterogeneity, liquidity creation, profitability, and stability of banks. In Chapter 1 we motivate the analysis by presenting the main developments that have been taking place in the banking sector as far as these four elds are concerned and highlight their importance to the appropriate functioning of the nancial system and of the economy overall. In Chapter 2 we address the issue that conventional surveys on bank efficiency draw conclusions based on the assumption that all banks in a sample use the same production technology. However, efficiency estimates can be severely distorted if the existence of unobserved differences in technological regimes is not taken into consideration. We estimate the unobserved heterogeneity in banking technologies using a latent class stochastic frontier model. In order to arrive at a policy implication that is valid across time and markets, we present two applications of the model using separately data from the UK and Greek banking sector over the periods 1987-2011 and 1993-2011 respectively. To increase the precision of our inferences, we adopt two distinct empirical methodologies: a panel data method and a pooled cross-section modelling strategy. Our results reveal that bank-heterogeneity in both banking sectors can be controlled for two technological regimes. We find a trade-o¤ between the level of sophistication within a fi nancial system and its level of aggregate efficiency. Consistency among the results is established under both methodologies. Further, we propose a methodology with regard to M&As activity of UK and Greek banks within a latent class context. We examine numerous potential M&A scenarios among banks that belong to different technological regimes, and we test whether there is a transition of the new banks to a more efficient technological class resulting from this M&A activity. We find strong evidence that new financial institutions can be better equipped to withstand potential adverse economic conditions. Finally, we cast doubt on what the true motivation for M&A activity is and we extract important policy inferences in terms of social welfare. In Chapter 3 we introduce the "Cost Efficiency - Liquidity Creation Hypothesis" (CELCH) according to which a rise in a bank s cost efficiency level increases its level of liquidity creation. By employing a novel stress test scenario under a PVAR methodology, we test the CELCH and the direction of causality among liquidity creation and cost efficiency variables in the UK and Greek banking sector. Moreover using new measures of liquidity creation (Berger and Bouwman, 2009) we address the question of whether potential M&As can enhance liquidity creation and create additional credit channels in the economy. We evaluate and compare the robustness of potential consolidation scenarios by employing half - life measures (Chortareas and Kapetanios 2013). We show a positive impact of cost efficiency on liquidity creation in line with CELCH. The empirical evidence further suggests that potential consolidation activity can enhance the ow of credit in the economy. Bank shocks seem to be the most persistent on both liquidity creation and cost efficiency and the UK banking system is found to withstand more effectively adverse economic conditions. Finally, we cast doubts on the strategy followed by policy authorities regarding the recent wave of M&As in the Greek banking sector. In Chapter 4, we attempt to shed light on the trade-o¤ between fi nancial stability and efficiency. We highlight that current tests of banking efficiency do not take into account whether banks managers are taking too much or too little risk relative to the value maximising amount. We assume that moving from an intermediary bank type balance sheet to an investment bank type not only changes the risk-return combination of the balance sheet but also increases the banks degree of instability, that is the probability of insolvency when adverse effects occur. To this extent, we propose a new efficiency measure which incorporates all the aforementioned ambiguous points. An empirical investigation of US commercial banks between 2003-2012 suggests that our proposed risk-adjusted index has superior explanatory power with respect to banks profi tability and gives better predictions compared to conventional banking efficiency measures. This holds after various robustness checks. Chapter 5 summarizes the main findings of all three distinct studies and concludes by highlighting the importance and the contributing points of the thesis in the banking and financial economics literature.

This thesis analyses the impacts of global financial crisis 2007 - 2009 on capital markets and investment banking industry. The aim of this work is to find the most important causes of the financial crisis, their relations and sequence as well as the role of investment banking industry in this crisis. First chapter gives a theoretical framework and overview of investment banking and institutional models. Second chapter then analyses the key causes of financial crisis. Third chapter analyses impacts of the crisis on selected capital markets and individual investment banks.

Since reformed of banking structure in China, banks have been gradually developed their operation system. Moreover, the restructure in commercial bank after joined WTO had established China¡¦s banks performance and international reputation. Since 2007, many large commercial banks have strength its risk management based on the commitments made by China Banking Regulatory Commission (CBRC) to follow the New Basel Capital Accord. When the global banking industry is devastated by global financial crisis (GFC) during 2008, China¡¦s banks are less affected by GFC. In addition, the capital scale and revenues performance were thrived during GFC. Therefore, it shows that banks in China had improved the resilience ability during financial crisis. However, being originated in China¡¦s loose monetary policy and economic stimulus package after GFC, investors worried that domestic banks might bear high risks. Notably, the risk is specific risk from each bank instead of system risk. This study employs Markov regime-switching model to examine 14 China banks¡¦ stock prices. The empirical evidence supports our hypothesis that behavior of China banks¡¦ stock prices has confronted structural change after GFC. Furthermore, this research presents that unsystematic risks from each bank were significantly decreased after GFC. It indicates that investors are too pessimistic on the banks in China might suffer high risk after government interventions.