In this thesis I study two fields of empirical finance: market integration and economic forecasting. The first two chapters focus on studying regional integration of Mexican and U.S. equity markets. In the third chapter, I propose the use of the daily term structure of interest rates to forecast inflation. Each chapter is a free-standing essay that constitutes a contribution to the field of empirical finance and economic forecasting. In Chapter 1, I study the ability of multi-factor asset pricing models to explain the unconditional and conditional cross-section of expected returns in Mexico. Two sets of factors, local and foreign factors, are evaluated consistent with the hypotheses of segmentation and of integration of the international finance literature. Only one variable, the Mexican U.S. exchange rate, appears in the list of both foreign and local factors. Empirical evidence suggests that the foreign factors do a better job explaining the cross-section of returns in Mexico in both the unconditional and conditional versions of the model. This evidence provides some suggestive support for the hypothesis of integration of the Mexican stock exchange to the U.S. market. In Chapter 2, I study further the integration between Mexico and U.S. equity markets. Based on the result from chapter 1, I assume that the Fama and French factors are the mimicking portfolios of the underlying risk factors in both countries. Market integration implies the same prices of risk in both countries. I evaluate the performance of the asset pricing model under the hypothesis of segmentation (country dependent risk rewards) and integration over the 1990-2004 period. The results indicate a higher degree of integration at the end of the sample period. However, the degree of integration exhibits wide swings that are related to both local and global events. At the same time, the limitations that arise in empirical asset pricing methodologies with emerging market data are evident. The data set is short in length, has missing observations, and includes data from thinly traded securities. Finally, Chapter 3, coauthored with John Maheu and Alex Maynard, studies the ability of daily spreads at different maturities to forecast inflation. Many pricing models imply that nominal interest rates contain information on inflation expectations. This has lead to a large empirical literature that investigates the use of interest rates as predictors of future inflation. Most of these focus on the Fisher hypothesis in which the interest rate maturity matches the inflation horizon. In general, forecast improvements have been modest. Rather than use only monthly interest rates that match the maturity of inflation, this chapter advocates using the whole term structure of daily interest rates and their lagged values to forecast monthly inflation. Principle component methods are employed to combine information from interest rates across both the term structure and time series dimensions. Robust forecasting improvements are found as compared to the Fisher hypothesis and autoregressive benchmarks.

The economic reforms in Jordan during the last two decades have highlighted and promoted the role that non-financial firms play within the Jordanian economy. The ability of firms to play this role is in major part determined by the structure of the financial system in which they operate, and in particular whether this financial system is able to make capital available efficiently to those firms that need it. Whether this is the case can be investigated by analysing the impact of firm characteristics on some of the most important financial decisions taken by these firms, and how these decisions are influenced by the presence of market imperfections. The thesis examines the relation between the financing and investment decisions, where the effect of financial constraints on the firm’s investment decision is investigated. In particular, this thesis focuses on how financial constraints affect different firms by investigating the extent to which the reliance on internal cash flow is affected by firm characteristics such as size, age, dividend payout ratio, and market listing. We find that Jordanian firms are financially constrained, but that these constraints do not appear to be related to firm characteristics. Further, results show that Jordanian firms use debt rather than equity to finance their investment. The second empirical chapter focuses on the main determinants of firms’ capital structure. Here the results show that Jordanian firms follow the pecking order theory, where profitability and liquidity have a negative impact on the level of debt. Size and market to book value have a positive impact, supporting the view that there are significant constraints on debt financing since indicators of the financial health of the firms affect their capital structure ratio. There is also evidence that ownership structure affects the firm’s access to debt. The final empirical chapter examines the impact of firm characteristics on dividend policy, and shows that profitability and market to book value have a positive impact on dividend policy, implying that firms with better access to capital or credit pay dividends. This implies that firms retain earnings in order to ensure that they have sufficient capital to invest, confirming the initial result that Jordanian firms are financially constrained. There is also evidence of the impact of ownership structure, consistent with the predictions of agency cost theory, while institutional investors appear to follow the prudent-man restrictions, being positively associated with firms that pay dividends. This thesis confirms the presence of market imperfections that have a significant influence on the financial decisions taken by Jordanian firms. The consistent evidence of the importance of retained earnings shows that these firms face substantial constraints in terms of their access to external funds, despite the reforms to the Jordanian financial system over the last two decades.

Current theoretical insights into firm internationalisation have mainly been established from research on firms originating from developed countries, with a strong focus on the manufacturing sector. Studies have recently begun to examine the internationalisation of emerging market firms, the international growth of SMEs, and service firm internationalisation, and a range of theories have been employed to gain understanding in these areas. This study examines internationalising small service frims from an emerging market, whose location-intensity makes them a rare type of firm for whom internationalisation might appear to be a counter-intuitive strategy. This study seeks to understand the internationalisation motives, enablers, and paths of location-intensive food service SMEs from the emerging Middle East and North Africa (MENA) region. It asks why, what and how to location-intensive food service SMEs from emerging markets internationalise? The aims is to provide a deeper understanding of firm internationalisation by examining a group for whom the purpose and methods of internationalisation appears to be obscure. To do this, the thesis introduces a more comprehensive account of firm internationalisation by identifying the three interrelated aspects of internationalisation, which are presented as motives, enablers and paths. This is followed by a review of the mainstream internationalisation theories and perspectives, before revealing important findings that have emerged from previous internationalisation research separately on the emerging markets, SMEs and services and these are drawn together into an overall research framework. The research method balances deductive and inductive approaches. It recognises existing research an theoretical frameworks, but allows for new themes to emerge inductively from the data. A multiple case study was adopted, with qualitative data collected through interviews with owners and top managers of purposefully selected case firms. Industry experts were also interviewed and relevant documents were reviewed to achieve triangulation and minimise bias. Data was explored and thematically analysed by coding into the pre-existing categories suggested by the conceptual framework, and this allowed new findings and themes to emerge. This exploratory study revealed a number of concepts that shaped a coherent approach to the interrelated aspects of internationalisation. Perspectives found in emerging market MNE literature are extended and offer useful insights for location-intensive service SMEs from emerging markets but other important themes emerged from the findings itself. the study suggests that asset augmenting motives, strategic and entrepreneurial enablers and outward and inward linked paths are important when explaining the internationalisation of these firms. These firms have strategic motives of increasing their organisational legitimacy in their home market primarily due to the entrance of well-established MNEs and consumer perceptions. The strategic entrepreneurship paradigm captures many of the internationalisation enablers of the case study firms, specifically the entrepreneurs' role in simultaneous opportunity seeking (either recognition or creation), and advantage seeking behaviour through research building. The paths pursued by the firms are found to be both outwardly and inwardly linked, in a way closely associated with Luo and Tung's (2007) springboard perspective. Finally, the case firms' internationalisation paths reflect a deviation from the born-again global viewpoint first presented by Bell et al (2001). This study advocates that emerging market service firms need to implement and coordinate a number of strategies simultaneously to upgrade their resources, due to the entrance of established foreign MNEs. This implies that foreign MNEs should recognise their own resource combinations that represent real value to local firms, and therefore re-examine whether further standardisation over adaption is better suited when entering certain host markets. This thesis highlights the importance of impression management to complement legitimacy in consumer-centred industries, and this is suggested as a rich avenue for future enquiry. Future research might also test the theoretical contributions made her, especially concerning the new motives, enablers and paths identified in this study.

Financial authorities have traditionally relied on fines, suspensions, and bars to discipline misconduct in financial markets and, in that way, protect public investors and promote financial development. In theory, these sanctions should be sufficiently high to internalize the social cost of wrongdoing and deter future misbehavior. In practice, however, public firms are often criticized for being under-punished. This concern has motivated a line of research, especially in the United States, to examine whether enforcement actions initiated by public authorities generate negative indirect effects for the firms accused of misbehavior and, therefore, whether those effects supplement the regulatory sanction. In general, the answer to this question is positive under certain circumstances. Whether or not firms also suffer collateral effects in emerging financial markets, however, is a question that has received little attention in the literature. The purpose of this work is therefore to make a first step to fill this gap. Addressing this gap is important because emerging markets are smaller, less liquid, and more concentrated than the United States' financial market, which might neutralize the side financial effects of enforcement that prior studies have documented. As a result, the policy recommendations proposed in the prior literature are not necessarily applicable to emerging economies. This work focuses on three specific types of collateral effects: the effect of enforcement on (1) the defendant's stock price, (2) the defendant's operating performance, and (3) the cost of external financing. In terms of types of violations and sample countries, this work focuses on enforcement actions triggered by securities regulation violations in the five countries that form the MSCI-EC-LATAM index (Morgan Stanley Capital International Emerging Markets Index - Latin America). The results indicate that the stock price and operating performance of firms whose insiders were sanctioned for insider trading decline significantly after the imposition of the sanction. These results have various implications for the regulation of official penalties as a tool to promote financial development.

Widespread support for capital account liberalization in emerging markets has recently shifted to skepticism and even support for capital controls in certain circumstances. This sea-change in attitudes has been bolstered by the inconclusive macroeconomic evidence on the benefits of capital account liberalization. There are several compelling reasons why it is difficult to measure the aggregate impact of capital controls in very different countries. Instead, a new and more promising approach is more detailed microeconomic studies of how capital controls have generated specific distortions in individual countries. Several recent papers have used this approach and examined very different aspects of capital controls - from their impact on crony capitalism in Malaysia and on financing constraints in Chile, to their impact on US multinational behavior and the efficiency of stock market pricing. Each of these diverse studies finds a consistent result: capital controls have significant economic costs and lead to a misallocation of resources. This new microeconomic evidence suggests that capital controls are not just "sand", but rather "mud in the wheels" of market discipline

A free and flexible business environment attracts international organisations to those markets that have big growth potential and high profit margins. To penetrate emerging markets is of great interest to any international organisation. The situation gets more intense if it is in the field of telecommunications. Telecommunications (telecoms) and information technology (IT) are generically known as the information and communication technologies (ICT) industries. ICT is one of the fastest growing industries in the world and is also considered among the biggest markets in terms of customer base, growth and profitability. The competition is very high in such markets, so relatively unique, attractive and extraordinary business strategies are usually practiced by these companies. The situation may create an atmosphere of upheavals and uncertainties in such markets. Extraordinary or unethical business policies can not only affect the business of other organisations, but also has some after-effects on societies and the mindset of target nations and market ethics. Organisations are very much engaged with society and work in the social environment, therefore the socio-cultural components is of great importance when designing business strategies. Exploring the facts about emerging markets and by analysing the case of Chinese company Huawei in the Pakistani telecom market, this thesis gives investigates and assess the success factor of this Chinese company. This thesis highlights the upheaval factors of emerging markets, by analysing the role of cultural interests and the mindsets of target nations for organisations planning their strategies

Drawing insights from liability of foreignness, the punctuated equilibrium model and the resource-based view, this dissertation develops an integrated model to identify the successful strategies and characteristics of both domestic and foreign firms operating in emerging markets, affected by regulatory punctuations. Accordingly, three research questions are addressed: Why are some foreign firms more likely to survive than other foreign firms? Why are some domestic firms more likely to survive than other domestic firms? Are there any similarities between successful foreign firms and successful domestic firms? Using event-history methodologies and the Mexican banking industry as the unit of analysis, this dissertation shows the following results: Foreign firms (banks) from countries with stronger commercial ties to Mexico (the focal emerging market), were less likely to exit the banking industry. Also, the likelihood of exiting the industry, by a foreign firm, was negatively related to domestic firm (bank) acquisitions. For the domestic firms (banks), there was a positive relationship between international diversification and firm survival and a negative relationship between aggressive (loan) growth and firm survival. Also, marginal support was found about the positive relationship between “grupo” affiliation and firm survival. This research contributes to the extant literature by extending current theories when considering the effect of radical change. For instance, while punctuated equilibrium provides a good “environmental” explanation about a firm’s need to adapt to radical change, it does not suggest how firms should adapt to this change. However, by providing an explanation on how firms suppose to adapt to this radical change, this dissertation had expanded the theoretical implication of the punctuated equilibrium model. Similarly, the present dissertation provides a theoretical extension to liability of foreignness by finding that not all foreign firms face the same liability of foreignness. Lastly, the resource-based view is also extended by this dissertation research, as it is found to have implications for emerging markets firms that are different from foreign developed market firms.

Abstract This article tries to give out the possible practices for these MNCs¡¦ subsidiaries in Taiwan and the Government of Taiwan to prolong, sustain, and even transform their own capabilities and subsidiaries¡¦ status when facing the raising of emerging market of China. After rearranging lots of articles concerning MNCs, this article take the dyadic view (subsidiary ¡V subsidiary ) to discuss the relationship of the subsidiaries between the two sides. And, this article¡¦s dependent and independent variables are also come from two main research streams of the MNC (i.e. Bartlett and Ghoshal(1989) and Porter(1986)). Through out the two main research streams, this article can not only give practical suggestions for the subsidiaries in Taiwan and the government of Taiwan but also give some theoretical extensions and contributions. Besides, this article also ties to explore the possible types of regional resources allocations in Asia for these MNCs. The practical suggestions following the empirical results are as follows: 1.no matter what the roles of the subsidiaries in Taiwan will be, to maintain a acceptable performance result is important for not only sustain their own status but also contribute to receive new charters. 2. the subsidiaries in Taiwan need to foster their own specialized capabilities, promote internationalization mentality for these higher ranking executives, which can prolong their own advantages edge. 3. social interactions are as important as economic ones. Subsidiaries¡¦ executives need to focus on the cultivation of social capital. 4. good business environment help make integration of value activities, but not necessarily contribute to future status of the subsidiaries between the two sides. 5. government of Taiwan needs to build and maintain infrastructure for helping create subsidiaries¡¦ capabilities. This article also find out four main types of the resources allocations of the MNCs. 1.regional centric: featuring raw materials, manufacturing, product design, human resources being global scale, but finance and marketing being coordinated in southeast Asia region, sales and process design being coordinated in great China region. This type of strategy is similar to Bartlett and Ghoshal(1989)¡¦s international strategy. 2.tansnational centric: featuring product design and process design being coordinated in global scale, marketing and sales being coordinated in regional area. This type of strategy is similar to Bartlett and Ghoshal(1989)¡¦s transnational strategy. 3.global centric: featuring all the value activities are coordinated in global scale, let no one value activity is coordinated in Asia region. This type of strategy is similar to Bartlett and Ghoshal(1989)¡¦s global strategy. 4.regional centric: featuring product design and process design are coordinated in great China region, other value activities like manufacturing, finance management, accounting /law services being also coordinated in great China region. This type of strategy is similar to Bartlett and Ghoshal(1989)¡¦s multidomestic strategy. The meaning of these four types are as follows: 1.regionalized production is not antipode of globalization production. globalization means the linkage of different regional areas. Globalization and regionalization is the same coin of different sides. 2.responding to what Porter(1998) says, global competition is managing the integration of these interrelated and dispersed resources. 3. different types of value activities are dispersed in different regions. Firms need not to concentrate all the activities in one country or region but need tightly coordination. 4. compared to Malnight(2001), this article indicates four types of different strategies which represent different levels of coordination.

Current world economy is impacted by the new and the old economy systems primarily due to high-tech software and hardware products that are constantly emerging to the market place. It has brought many innovations and high efficiencies to people¡¦s daily lives, e.g., the food, clothing, housing and transportation, etc. The influence of this evolution is potentially enormous and such evolution inspires people¡¦s confidence in the current Electronic Age. By reviewing the world¡¦s current economy, it appears that winner¡¦s economy system must rely on both the new and the old economy industries positively. In other words, the new economy has to be established on the foundation of stable traditional industries, and the old economy system must be improved and advanced with the help of the new technology. The basic reason is that the necessities of people¡¦s life are mostly supplied by the traditional industries from the old economy. As an island nation under the trend of the world¡¦s economy, Taiwan¡¦s new and old economy systems are required to be balanced in such a way that mutually one benefits the other. Because of this concern, the new government proposed a ¡§Green Silicon-Island Economical Development Project¡¨, and aggressively launched a ¡§Boosting Traditional Industry Plan¡¨ as well. By cultivating the traditional industries, the new economic technology can prosper accordingly. At this opportunistic juncture, Company A formulated a 5-year business plan to venture into a traditional industry: manufacturing of friction materials. The goal is to raise 4 million USD for starting up a production facility to manufacture and market a wide range of friction materials, in an effort to respond to the Government¡¦s call of boosting traditional industries. The main focuses of the proposed business are to build a solid manufacturing foundation on Taiwan, to market the products to the entire world, and to thrive the business to excellence with technology-based operation and management. The variety of friction materials is overwhelming. In terms of material composition, friction materials can be classified into the following four types: semi-metallic, sintered metallic, paper-based, and carbon fiber-based materials. This proposal explores key issues that are essential to the success of the production of all four types of friction materials. These key issues include: industry infrastructure, market size analysis, marketing strategies, operation networking, risk analysis, and core technical strength. Based on the above analysis, a 5-year financial planning is presented. Detailed analysis for the financial objectives on financial feasibility, cash flow, break-even point, and investment interests are also included. ¡K¡K¡K¡K¡K

The aim of this thesis is to test whether incorporating principles of responsible investment will have an impact on financial performance when investing in emerging markets. A developed market is included to bring up potential structural differences between emerging and developed markets. Principles of responsible investment suggested by the UN concerns environmental, social, and governance (ESG) issues. The financial performance of highly rated ESG portfolios was evaluated by using the capital asset pricing model (CAPM) and the Fama French 3-factor model. Alpha has been used as the performance measurement. Results reveal that incorporating principles of responsible investment by using a best-in-class approach generates statistically significant and positive alphas in emerging markets, while the developed market of the U.S generates an insignificant alpha.