Studies in international finance and corporate remuneration

• Main Author: Li, Lu
• Published: Cardiff University 2011
• Subjects: HG Finance
• Online Access: http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.567228

This thesis makes four different contributions to the literature on international finance and corporate governance. Firstly, it examines the forward exchange rate bias and the forward premium puzzle, using weekly and daily data from thirty-one developed and emerging economies during 1999-2010. The forward-spot relationship is analysed through both a time series and a panel construction. Secondly, it investigatges empirically the relationship between the e3xchange rate and the term structure of interest rates, as proposed by Lim and Ogaki (eg Fama 1984: Lim and |Okaki 2004) using data from sixteen emerging economies during 1993-2001. Thirdly, it examines the impact of the term structure of the interest rates on bond risk in G7 countries and it tests the stability of this relation during pre- and post-financial crisis periods. Fourthly, this disseration exploes the link between a director's pay and corporate performance using a panel data set of FTSE 350 companies during 2004-2009. The empirical results deomonstrate a robust cointegrating forward-spot relationship and support the forward rate unbiasedness with high frequency data: however, the forward premium puzzle remains in most sample economies. The term structure of interest rates plays an important role in exchange rate determination and the cointegrating relationship is stable despite the presence of a number of exchange rate regime changes for the emerging economies. In this study the short rate is considered as a proxy for economic uncertainty and the yield spread is considered as a proxy for business condition. The findings show statistically significant effects of the short rate and yield spread on the bond risk for G7 economies, implying that interest rate policy may be important in reducing market volatility. Lastly, a positive and significant relationship is identified between corporate performance and a director's pay in both levels and first difference regression specifications, and through both directions. However, this link has broken down since recent financial crisis