PhD

The Global Risk Report (2021) identifies ESG risks as the number one risk faced by the global economy. Banks have contributed to this risk and can also contribute to mitigating it. High exposure of Banks to ESG risks will contribute to climate disaster, which in turn will have financial risk implications for banks in the form of disaster events risks and energy transition risks. Depositors can discipline banks in reducing and preferably eliminating their ESG risks through enforcing market discipline by deposit withdrawal. This thesis investigates the extent to which deposit withdrawal works as market discipline against ESG risks in the banks of the OIC region. The thesis also examines the impact of financial risk represented by CAMELS variables on depositors' behavior. The generalized method of moments (System GMM estimator) is used for dynamic panel data models, as well as a sample from 65 countries over the period 2007 to 2016. Our findings indicate that depositors react significantly to environmental and governance risks while depositors' discipline does not exist with social risks. With regard to financial risks, our findings suggest weak evidence of market discipline. However, regressing CAMELS components separately provides better results and understanding than regressing CAMELS components collectively. In the OIC region, the study indicates that depositors tend to be sensitive to changes in capital adequacy, bank earnings and ESG risks, while in the non-OIC region, depositors are only sensitive to management quality.

This paper attempts to examine the relationship of financial development with environmental quality, incorporating the role of institutional quality. There are three objectives of this study which are: to examine the impact of financial development on environmental quality and to ascertain the existence of Environmental Kuznets Curve (EKC); to examine the role of institutional quality in the relationship; and to highlight differences, if any, between Islamic countries and non-Islamic countries on the said relationship. This research applies generalized method of moments (GMM) for estimation which is the most suitable estimator to manage the unobserved fixed-effects and endogeneity issue between dependent and independent variables. Average 3-years data is used from World Development Indicator of World Bank and ICRG database of 72 countries globally and with period ranging from of 1980 to 2012. The dependent variable is environmental quality while independent variables are financial development, GDP per capita, energy use, trade openness and institutional quality. The results from the GMM estimation suggests that financial development have significant impact on environmental quality. However, the direction of the impact is inconsistent, depending on the type of emission. In addition, there is an evidence of EKC relationship between environmental quality and income. Energy use has a significant and positive impact on environmental quality, although trade openness has no significant impact on environmental quality. The study further analyses the role of institutional quality on these relationships and proves that institutional quality does play a role in reinforcing financial development to improve environmental quality. Nonetheless, the degree of impact varies with the strength of the institutional quality.

In the last three decades, the microfinance market has continued to grow, from 13 million clients in 1997 to 98 million in 2009 and 139.9 million in 2018. As microfinance grows, a transformational change in microfinance in microfinance has taken place. Prior to the 1990s, microfinance worked more as microcredit for poverty alleviation and development instruments which were still subsidized. But today microfinance has turned into a more complex ecosystem with more varied market participants and approaches. Will these microfinance institutions be sustainable in providing financial and social services now and in the future? What are the key variables that play an important role in the sustainability of the MFIs? This study is to help find the answers to these questions using a multi-criteria decision-making framework and a dynamic parametric analysis. This study aims to measure the sustainability of microfinance institutions in a multi-dimensional manner so that the achievement of its mission - the triple bottom line - can be measured and evaluated. This study also examines MFI in OIC member countries considering that OIC is a group of countries with the the second largest number of members after the United Nations. Investigating the MFIs from 111 countries worldwide from 2003 to 2019, this study utilizes the TOPSIS and VIKOR frameworks as the two multi-criteria decision-making (MCDM) approaches that have been proven efficient, consistent, and compatible with the decision problem on measuring MFI's sustainability performance. This study utilized a framework of governance approach and institutional theory to predict the key variables of MFI's sustainability performance through a dynamic parametric method, namely generalized method of moment, known as GMM.

The Islamic banking industry has grown and gained a remarkable position in the global share of the financial sector. This growth requires a strong emphasis on intellectual capital (IC) that includes dedicated human capital, reliable structural capital, and a committed and long lasting relational capital among participants in the Islamic banking ecosystem. The study aims is to examine and compare the intellectual capital disclosure (ICD) practices of Islamic banks under different reporting regimes. The IFRS issued by IASB and FAS issued by AAOIFI are the two commonly used standards for financial repoting by Islamic banks. The findings indicate that, on average, there is not much difference between IFSB and AAOIFI scores (IASB:57.25% vs AAOIFI: 56.58%); in fact, most of IFSB-based banks performed better that AAOIFI-based banks throughout the period of study except in first year (i.e. 2012). The study also examined the relationship of corporate governance and the moderating role of Shariah committee with the extent of ICD practices among the Islamic banks. Several corporate governance mechanisms such as board size, number of board meetings, board gender, board independence, board expertise, audit committee size, number of audit committee meeting, audit committee gender, audit committee independence, and audit committee expertise were used as dependent variables. While, selected Shariah committee characteristics that, included Shariah committee size and Shariah committee gender were the moderating variables and firm characteristics were used as control variables to control for cross-sectional differences associated with ICD. The study applied the prominent resourced-based, agency and legitimacy theories and formulated twenty-three (23) hypotheses. Based on a total sample of 231 Islamic banks in four countries, namely Malaysia, Brunei, Bahrain and Jordan covering year 2012 to 2018, the findings revealed that having an effective governance structure is essential, as it is able to influence the ICD practices of Islamic banks. Specifically, the study found that ICD practices of Islamic banks is significantly and positively associated with board size, board independence, audit committee gender and audit committee independence. The results suggest that larger or reasonable board size tends to have varied skills and expertise among the board members, resulting in more information by allowing for greater diversity of backgrounds and viewpoints.

Theoretically, one of the ways governments that aim to improve economic growth in their countries is by increasing expenditure on human capital. However, some empirical evidence from OIC countries do not support the finding that expenditure on the two most important aspects of human capital (expenditure on education and health) affects growth positively. One of the plausible reasons for the observed unusual finding could be the presence of moderating variables. Therefore, this study investigates the relevance and applicability of one such moderating variable, namely the quality of institutions, given the relatively low global ranking of OIC countries in terms of institutional quality. This study contributes to the new institutional economics literature by discovering that some institutional quality variables determine the way human capital expenditure affects economic growth. This study uses the methodology of panel data analysis and interaction graph plots. Interaction graph plots show the marginal effect of a continuous variable on another continuous variable. Without the inclusion of interaction terms, we find that, on average, in OIC countries, the effect of government education expenditure (GEE) on growth is insignificant while the effect of government health expenditure (GHE) on growth is either insignificant or significant and negative. The interaction graph plots show the effect of government human capital expenditure on growth at different levels of growth. When we consider the marginal effect of institutional quality, we find that generally, better bureaucracy quality, control of corruption, government effectiveness, law & order and rule of law augment the positive effect of GEE on growth. We also find that better government effectiveness and law & order augment the positive effect of GHE on growth.

This dissertation examined the efficacy of Islamic financing instruments in bridging the energy infrastructure investment gap in Nigeria, a fiscally-burdened, developing country. A growing energy infrastructure investment gap is an imminent concern in Nigeria, like in many developing countries, and has been precipitated by financial and economic challenges. This research sheds light on two critical problems associated with the conventional infrastructure financing instruments in PPP: a. high risk of financial distress due to high debt gearing; and b. a substantial fiscal risk that endangers fiscal sustainability. Using a case study approach, the dissertation presents the case of Nigeria's Mambilla Hydro Electric Power (HEP) Project that has failed to kick off for over forty years since its initial approval due to several financing hurdles. This study examined in the Mambilla HEP project in its pre-set conventional financing framework and developed research hypotheses to design and structure an alternative Islamic financial instrument. Further, the study employs two distinct financial modelling techniques to test each of the hypotheses. First, it uses Monte Carlo simulation with optimisation algorithms to solve an objective function that maximizes the project's financial viability subject to specific economic constraints. Second, the dissertation uses scenario-based sensitivity analysis to assess Nigeria's (as the host country) fiscal sustainability position of the host country before and after implementing the infrastructure project using both the pre-set conventional financing instrument and the proposed Islamic financing solution.