Dissertation Topics

Topic

1 External Auditing and Assurance ✓

✓ ✓
✓ ✓
4 Evaluating Financial Performance of Companies ✓ ✓ ✓
5 Sports Finance ✓ ✓ ✓
6 Calendar Effects ✓ ✓ ✓ ✓ ✓
7 Corporate Social Responsibility (CSR) ✓ ✓ ✓ ✓
8 Stock Market Efficiency/ Behavioural Finance ✓ ✓ ✓ ✓
9 Event Studies ✓ ✓ ✓ ✓ ✓
10 Mergers ✓ ✓ ✓ ✓
11 Capital Structure ✓ ✓ ✓ ✓ ✓
12 ✓
13 General Management Accounting ✓
14 Islamic Banking/ Finance ✓
15 Financial Performance in the Public Sector ✓ ✓ ✓ ✓
16 Bank Regulation ✓
17 Bank Strategy and Performance ✓ ✓
✓ ✓ ✓
✓ ✓ ✓ ✓
✓ ✓ ✓ ✓ ✓
21 Corporate Governance ✓ ✓ ✓ ✓
22 Credit Ratings/Credit Risk/International Finance ✓ ✓ ✓
✓ ✓ ✓
24 Disasters and their effect on the stock exchange ✓ ✓ ✓
✓
✓
27 Dividend Policy ✓ ✓ ✓ ✓ ✓
✓ ✓ ✓
✓ ✓
30 Predicting Corporate Failure using Z‐score model ✓
31 Micro‐finance ✓ ✓
32 Competition, Efficiency and Stability in Banking ✓
33 Forecasting Exchange Rates ✓ ✓ ✓
✓ ✓ ✓
35 Earnings Management ✓ ✓
36 Ownership Structure ✓ ✓ ✓
 Dissertation Topics

Topic 1 External Auditing and Assurance

Topic Background:

In light of the recent economic crises and the corporate scandals of the early 2000’s, the
role of the external auditor as a deterrent to corporate failure has been the subject of much
discussion. Issues like auditor independence, and audit mechanisms /processes are now at
the forefront of debate. Also the role of the external auditors in relation to fraud detection
and reporting is increasingly being challenged, as well the auditor’s liability.

There is also much debate about whether the audit market is functioning effectively and
whether there is adequate competition as the large accounting firms dominate the market.

Example research questions could include:

1. Does the audit opinion/report have an impact on share price movements?

2. Do Audit Committees have a significant role to play in corporate financial reporting?
3. The cost of the SOX requirements versus audit quality.
4. Can the audit firms continue in their current form offering audit and consultancy
services to their clients or should audit firms be separate?
5. Should the audit market be more closely regulated?
Topic 2 Evaluating Financial Performance of Companies

Topic Background:

The annual report and financial statements provide a summary of an organisations revenue,
expenses, assets, liabilities and equity. On their own however, these do not allow us to
easily see how well (or poorly) an organisation has performed. Using a range of
interpretation techniques including ratio analysis, vertical and horizontal analysis, we can
review performance and make comparisons with previous accounting periods, rival
companies and sector averages.

Example research questions could include:

1. A critical review of the financial performance of a company of your choice. This

would include comparison with industry averages utilising FAME.
2. How useful is the annual report and financial statements in outlining company
performance?
3. How useful are quantitative interpretation techniques such as ratio analysis and
have these tools developed as business has grown more complex?
Topic 3 Sports Finance

Topic Background:

With the ever increasing commercialisation of sport, sports finance has rapidly grown to
become an area of finance in its own right. General areas of research in this field could
include the funding and/or financial legacy of major sporting events, a comparison of the
American and European financing models or the impact of regulation on sport funding.

Football has arguably the highest profile of all sports and in recent years the financial
performance of football clubs has increasingly come under close scrutiny. Many clubs in the
English Premier League are accused of spending too much on wages and salaries and being
dependent on borrowed money or money from the sale of television rights. Added to this
are the inflated prices paid for the transfer of players. There is a huge amount being written
on this topic, and accountants Deloittes produce an annual report on the financial
performance of football clubs.

Example research questions could include:

1. Can the American model be applied in the UK – financial impact

2. Analyse the financial legacy of major sporting events.
3. Will the financial regulations imposed by UEFA work?
4. Does success on the field of play result in healthy financial statements?
5. Why do so many football clubs in the English Premier League experience severe
financial problems? Is it solely due to poor financial management?

Topic 4 Calendar Effects

Topic Background:

Calendar effects are cyclical anomalies in returns, which appears to be related to the
calendar. The most important calendar anomalies are the January effect and the weekend
effect. Many calendar effects have diminished, disappeared or even reversed since their
discovery.

Example research questions could include:

1. Are there still significant calendar effects, such as January effects?

2. What factors may contribute to the calendar effects?
3. Whether the calendar effects found can be utilized to generate positive investment
returns?
4. To test the profitability of trading rules based on calendar anomalies.
Topic 5 Corporate Social Responsibility (CSR)

Topic Background:

There has been increasing attention on the importance of corporate social responsibility
(CSR) reporting worldwide. While the number of academic studies in this area has increased
substantially in recent years, there does not seem to be any clear consensus concerning
whether engaging in outlays on corporate social and environmental reporting, perhaps as
part of the corporate social responsibility agenda of a company, is conducive to augmenting
capital market returns or otherwise (Murray et al, 2006). It is however suggested that on
average, socially responsible firms may yield higher stock returns than socially reprehensible
firms (Brammer et al, 2006). In any case, enhanced capital market performance remains a
strong potential driver for firms to engage in good corporate social performance as well as
CSER activities.

The European Commission (2001) defines corporate social responsibility as "a concept
whereby companies integrate social and environmental concerns in their business
operations and in their interaction with stakeholders on a voluntary basis." The efficient
markets hypothesis suggests that information regarding a company’s social and
environmental performance should be reflected in the stock market. It is also suggested
that enhanced corporate social responsibility should lead to enhanced returns (Brammer &
Pavelin, 2006).

A research study that examines CSER practices at the firm level in specific industries will
help shed light on any possible relationship between the quality of a firm’s CSER and its
capital market performance.

Example research questions could include:

1. What is CSR reporting? How different is that to conventional corporate reporting?

2. Does a company’s quality of CSR reporting affect the company’s financial
performance?
3. What are the incentives for firms to engage in corporate social activities?
4. When is it feasible for firms to engage in profit‐sacrificing CSR?
5. How does the interaction of competition and regulation shape the nature of
corporate social responsibility?
Topic 6 Stock Market Efficiency/ Behavioural Finance

Topic Background:

The general implication of stock market efficiency is that markets receive new information
about all aspects that affect stock prices but prices adjust with such speed that investors are
not capable of realising above‐average trading profits by trading on that information.

Tests of the validity of the EMH have been carried out in most of the stock exchanges all
over the world. A comprehensive review of the literature illustrates that even when one
sort of test (the serial correlation coefficient test, the run test, the variance ratio test, etc.)
rejects the random walk hypothesis, other tests may not. For example, tests may show
monthly prices follow a random walk, but weekly prices or daily prices may not.
Alternatively, the returns on indexes for a very long period may be shown to be
independent whilst the returns on indexes for sub‐period may be dependent. Therefore,
applying a variety of tests to different types of data and comparing the results on the bases
of similar sort of data and test implements will improve the accuracy of the study.

Topics that might be covered in this type of study include tests of the EMH (Weak, Semi
strong or Strong form), stock volatility issues or the implications of behavioural finance.

Example research questions could include:

1. Evaluating market efficiency by testing for the random walks in stock prices
2. Can technical analysts generate abnormal gains?
3. Do actively managed funds outperform the market?

Topic 7 Event Studies

Topic Background:

An Event study is a statistical method to measure security price changes in response to

events. Typically, a single event study analyzes the average security price reaction to the
same type of event experienced by many firms. For example, the event could be the
announcement of a merger, where analysis can be made to see whether investors believe
the merger will create or destroy value. The basic idea is to find whether there are
significant abnormal returns attributable to the event being studied. A typical event of
interests includes M&As, earnings announcements, dividend announcements, new financing
such as a right issue, corporate restructuring.

Example research questions could include:

1. Whether stocks over or under react to a particular event, e.g. earnings

announcement?
2. What factors may contribute to over or under reactions?
3. Is there any linkage between the “size” of the announcement and the abnormal
returns?
Topic 8 Mergers

Topic Background:

Many firms continue to use mergers and acquisitions as an alternative to organic growth as
a means of expanding company activities. They can be particularly useful when firms seek
entry into new markets (geographic or product) or when the benefits from economies of
scale large. Mergers tend to categorised as vertical, horizontal or conglomerate and can be
funded either from retained earnings, or by issues of either debt or equity.

There is an extensive literature on mergers, ranging from the motivations behind such
activity, the success (or otherwise!) of mergers, to in‐depth case studies of particular,
generally high profile mergers.

Example research questions could include:

1. Do mergers actually create shareholder value?

2. Why do mergers fail?
3. Does the way a merger is funded determine its likely success?

Topic 9 Capital Structure/Dividend Policy

Topic Background:

How important is a firm’s capital structure? From the early irrelevance theories of
Modigliani and Miller in the 1950s through to recent studies examining the impact of
market imperfections, there has been a huge volume of research conducted in this area.

Modern finance theory generally accepts that an optimal capital structure does exist, but
there remains much debate as to what that structure is and what factors determine it.
Factors such profitability, industry, volatility, asset tangibility, growth, non‐debt tax shields
etc have all been linked to capital structure, but as yet there is no dominant theoretical
model.

Example research questions could include:

1. What factors determine the gearing of firms in the UK?

2. Do gearing levels differ across countries, if so, why?
Topic 10 General Management Accounting

Topic Background:

The field of management accounting combines accounting, finance and management with
the goal of driving success and creating shareholder value. Dissertation topics in this field
can vary considerably and but should where possible focus on one key theme, for example;
the role and application of budgeting , the use of the balanced scorecard as a strategic tool,
the different approaches to costing (absorption v activity based costing) and working capital
issues, etc. Topics may also have a more strategic management accounting perspective and
consider areas such as; Just‐in‐time (JIT), Total Quality Management (TQM) or
benchmarking.

Example research questions could include:

1. Is traditional budgeting a broken process?

2. Compare and contrast absorption costing and abc approaches.
3. How do different businesses use the balanced scorecard – profit v non profit
Topic 11 Islamic Banking/ Finance

Topic Background:

Islamic banking is the fastest growing sector in the banking industry. Islamic banks operate
in accordance with the Shar’iah (Islamic law) which provides Muslims guidance on different
aspects of life including banking, business and economics. One of the major rulings of the
Shar’iah law is the prohibition of interest; Islamic banks are not permitted to deal in interest
but have other modes of finance in which they generate profit. One of the key principles of
Islamic finance is that of profit and loss sharing – this is when all parties in a financial
transaction would enter into a partnership arrangement agreeing to share profits of the
business venture along with any losses too according to the capital invested.

Islamic banks aim to promote socio‐economic justice in society and lie in between
capitalism and communism in allowing individuals to make money but not at the expense of
others. Investments must be ethical and cannot be linked to prohibited industries such as
those involving alcohol, tobacco or gambling.

The Islamic capital market is also seeing a huge growth, at present its’ assets are worth
approximately 1.3 Trillion US dollars but it is predicted to quadruple to $4 Trillion US dollars
by 2015 according to the IMF.

An associated area of research is to investigate the ability of the western conventional

banks to offer, exploit or control the functions of the Islamic financial system including their
products and services such as; Murabaha, Mudarabah, Musharakah, Bai Salam, Istisna and
Ijara. Takaful (Islamic insurance) is gaining popularity in the Islamic finance industry too. It is
estimated that Takaful is growing at 20% per year and many Muslim countries are untapped
markets whereby insurance penetration is below 2% of GDP.

Example research questions could include:

1. Why is Islamic Banking gaining popularity and how do these banks operate without
interest?
2. How are Islamic banks performing in comparison to conventional banks?
3. Are the conventional banks which are now offering Islamic products operating
strictly according to the Shar’iah?
4. Are Islamic banks following the true principles of Islamic Finance or just simply
following the conventional modes of finance and adapting these to be Shar’iah
compliant?
5. How does the Islamic Capital Market differ from the Conventional Capital Market
and why is it expanding so rapidly?
6. How does Takaful (Islamic Insurance) operate and what makes it different from
conventional insurance?
Topic 12 Financial Performance in the Public Sector

Topic Background:

The public sector is one of the most dynamic areas of the UK's economy today as successive
governments have sought to introduce market forces via regulation, funding changes, and
external audit requirements. From the NHS, to local government, to not for profit
institutions in the education sector, the current climate of austerity brings ever greater
challenges in achieving a much broader set of aims than simply the maximisation of
shareholder wealth.

Using publically available data, annual reports, and industry research we can focus on any
one of these subsectors and investigate the impact of new regulation, and new 'quasi
market' structures, on how these entities operate, how well they 'perform', and how
success can be measured in both monetary and non‐monetary terms.

Example research questions could include:

1. How have funding restrictions impacted the key performance indicators of NHS
Foundation Trusts?
2. How have increased audit and disclosure requirements affected the clinical goals
within the NHS?
3. How have funding cuts impacted on the revenue mix and range of services provided
by local government?
4. How have tuition fees and increased competition in the higher education sector
impacted University finances?
Topic 13 Bank Regulation

Topic Background:

The form and effectiveness of bank regulation has been looked at closely over the last
couple of years. There has been widespread criticism of both global banking standards, as
set by the Basel Committee, and the regulatory requirements imposed by individual country
regulators. Recent proposals from the Basel Committee, due to be implemented fully by
2019, will require banks to hold higher levels and different types of capital. However, the
banks themselves have criticised this as they argue that it will increase their costs of capital
so reducing the supply of funds available to lend whilst also increasing interest rates on
loans. The proposals also call for regulators to require some form of dynamic provisioning
for banks so that they are required to hold more capital during upturns in the economy
which can then act as a buffer during a downturn and allow them to maintain lending during
a recession.

Criticism has also come, however, from some regulators and other observers who have
argued that the new proposals do not go far enough and that levels of capital required
should be increased even further. In addition there have been suggestions by the Chairman
of the Independent Banking Commission in the UK that the cost of equity may not rise as
fast as banks suggest it will, if at all, in the light of increased capital requirements.

Finally, a number of regulators are also examining the potential links between competition
and financial stability with a view to determining whether the promotion of a more
competitive environment will result in a more unstable banking sector

Research could look at banks’ cost of capital under different debt/equity structures or the
relationship between the type and level of capital held by banks and their performance. The
issue of whether there is a link between the business cycle, levels of capital held by banks
and provisions made for potential losses on loan books could also, usefully, be investigated
as could the relationship between competition and financial stability.

Example research questions could include:

1. To what extent does the overall cost of capital vary as the bank alters the
proportions of equity and debt financing on its balance sheet?
2. Is there any evidence that banks’ levels of capital vary with the business cycle?
3. Is there any evidence that banks’ bad debts or provisions for potential loan losses
rise towards the peak of the business cycle?
4. What is the nature of the relationship between competition in banking and financial
stability?
Topic 14 Bank Strategy and Performance

Topic Background:
The most recent financial crisis has focussed attention on the strategies pursued by
international banks in recent years. In particular, the increased use of wholesale funding, as
opposed to deposits, has been combined with new product developments (such as
securitisations) which have taken assets off the balance sheet. The banks, themselves,
claimed that such strategies reduced their cost of capital and improved their own risk
management whilst, at the same time, reducing the likelihood of systemic collapse as risks
were more efficiently distributed through the financial system.
The results of the crisis have caused many regulators, policymakers and observers to
question the extent to which this has been the case. They have queried whether or not the
changing composition of liabilities on bank balance sheets has encouraged greater risk
taking and has led to more potential contagion in the event of an individual bank failure.
Likewise, the ability to securitise large parts of the asset side of the balance sheet may have
led banks to take less care in the initial screening of loan applications.

Research could focus on determining the nature of the relationship between wholesale
funding and risk taking or securitisation and the incidence of higher levels of defaults.

Example research questions could include:

1. To what extent are higher levels of wholesale funding in banks associated with
increased levels of balance sheet risk?
2. What is the nature of the relationship between securitisation of bank assets and the
levels of actual defaults or provisions for potential losses?
3. Is there any evidence that securitisation increased bank returns or improved
efficiency?
Topic 15 Corporate Governance

Topic Background:

Corporate governance continues to be a hugely topical issue in finance. From the corporate
failures of the likes of Polly Peck in the 1980s and Enron in 2001, up to the current
controversy over bankers pay, it is subject rarely out of the news.

The issue of how companies are controlled focuses on mechanisms such as the board of
directors, executive pay structures, the use of consultants, levels of disclosure, regulation
and codes of practice (e.g. Cadbury, Greenbury, Hampel). The underlying idea being that
good governance should ultimately lead to long term gains for shareholders.

Example research questions could include:

1. Do firms with larger boards perform better?

2. Is there a link between the pay of directors and the performance of their company?
3. What factors determine the level of corporate disclosure?

Topic 16 Credit Ratings/Credit Risk/International Finance

Topic Background:

The concept of credit rating originated in USA, around the year 1860, credit ratings of
companies have various uses. Credit ratings assigned by international agencies like Standard
and Poor’s, Moody’s and Fitch ratings are widely used by individual investors and regulators
as objective quality ratings for financial instruments. Shin and Moore (2003) examined
credit ratings by two leading Japanese and U.S. rating agencies assigned to Japanese firms
and investigated that the U.S. agencies Moody’s and Standard and Poor’s ignore special
corporate governance features of Japanese firms.

The object will be to consistently study the assessment of one or more of the above rating
agencies or to consistently estimate and identify the main determinants of credit ratings by
using a set of bank and country level characteristics, including financial ratios and non‐
financial issues such as; macroeconomic factor, indicators for regulatory, legal or other
explanatory variables. In addition, analysing the effectiveness of accounting and auditing
systems in reducing bank risk‐taking, this may result positively on the banking sector, and
producing a more stable banking system across countries depending on the national
characteristics of bank regulation and official supervision.

Example research questions could include:

1. What was the affect of the financial crisis on bank’s and country’s credit ratings?
2. What main factors determine the estimation of credit rating models?
Topic 17 Disasters and their effect on the stock exchange

Topic Background:

Do disasters, natural or otherwise, send stock prices spiralling? Historically, big natural
disasters reduce near‐term output while boosting economic growth over the long‐term
through reconstruction. There are plenty of both natural and man‐made disasters that have
occurred in the last century and it is generally accepted that they do have an effect on the
global stock market. But is this effect always a negative one as we would expect? Does this
effect differ in different regions of the world?

Most previous studies on natural disasters focused on their short run effects on stock
exchanges. For example, the nuclear companies` shares reactions have been tested after
the Japan Fukushima Daiichi disaster on the short run, but what do investors expect from
the nuclear companies in the long‐run? How will these shares react during both short and
long‐run? Do they react differently in different countries? Why?

Can the investors generate excess return during the disaster aftermath period? Are there
are arbitrage chances to take advantage of?

Example research questions could include:

1. The effect of the Japan 2011 Disaster on Nuclear and Alternative Energy Stocks.
2. Effects of Chernobyl and Fukushima disasters on the stock exchange.
3. The effect of the Deepwater Horizon oil spill on Oil and Alternative Energy Stocks.
Topic 18 Dividend Policy

Topic Background:

Dividend policy remains another one of finance’s key unanswered questions. From the early
irrelevance theories of Modigliani and Miller in the 1950s through to recent studies
examining the impact of market imperfections, there has been a huge volume of research
conducted in this area.

Modern theory generally accepts that dividend policy does matter, but as yet there is no
dominant theoretical model. Issues such as tax effects, signalling and stability, risk are
traditionally seen as key, but more recently, links to agency issues, the pay structure of
directors and share repurchases have been studied.

Example research questions could include:

1. What factors determine the pay‐out ratio of a company?

2. Is there a link between the equity pay of directors and the dividends they
recommend for their shareholders?
3. Do share prices react to dividend announcements?
Topic 19 Predicting Corporate Failure using the Z‐score model

Topic Background:

Due to ever more volatile economic climate, with constant threat of recession, and as a
consequence more organisations filing for bankruptcy, investors have become adverse to
high levels of risk. Therefore, being able to successfully predict corporate failure and the
associated risks is of great importance to both investors and the companies themselves;
investors are better informed to make investment decisions, whilst companies can more
readily address potential problems and hence may be able to avoid corporate failure and
continue to operate.

By using the Z‐score model, we can review performance and make comparisons with
previous accounting periods, rival companies and sector averages.

Example research questions could include:

1. To assess whether the Z‐score model has successfully predicted recent corporate
failures in the UK, by analysing the works of previous academic scholars
2. To test the effectiveness of Z‐score model on firms which have failed and continued
to operate in order to assess the predictive ability of the model
3. To examine the correlation between academic literature and the analysis.
Topic 20 Micro‐finance

Topic Background:

Though forms of micro‐finance have been around throughout history, Muhammad Yunus
took micro‐finance in new directions with his initiative in Bangladesh in 1976. This proved
so successful that his model of micro‐finance has been much copied more or less faithfully.
Yunus was awarded the Nobel Peace Prize in 2006 for this work.

Example research questions could include:

1. What are the success conditions for a sustainable programme of micro‐finance?

2. Can, and if so how, can the Yunus model of micro‐finance be scaled up to promote
large‐scale economic growth?
3. How far should profit‐seeking financial institutions be allowed to get involved with
micro‐finance?
4. To what extent are gender dimensions significant in micro‐finance programmes?
5. How should micro‐finance institutions be controlled in terms of their proper
governance and effectiveness?

Topic 21 Competition, Efficiency and Stability in Banking

Topic Background:

The question of whether more competition in banking is good or bad for financial system
stability in general and individual bank risk in particular has been intensely debated in
academic, as well as policymaking and regulatory circles, and there is no academic
consensus. Moreover, what role the efficiency could play between competition and bank
stability?

The project can analyse efficiency and productivity in banking in a country / area of your
choice, and /or assess the impact of market competition on bank’s performance, and / or
empirically examine the relationship between competition and systemic risk.

Example research questions could include:

1. Efficiency (and productivity) analysis in banking

2. Assess the impact of increasing banking competition on financial stability
3. Does competition reduce the risk of bank failure?
4. Empirically examine the relationship between developments in bank efficiency and
bank risk
Topic 22 Earnings Management

Topic Background:

Earnings management continues to be a topical issue in finance. Why and how companies
manipulate earning figures? Prior studies on earnings management have identified several
reasons, including income smoothing (Moses, 1987; Yoon and Miller, 2002b), management
compensation (Healy, 1985; Gaver et al., 1995; Holthausen et al., 1995), ownership control
(DeAngelo, 1986, 1988; Perry and Williams, 1994), equity offerings (Loughran and Ritter,
1995; Loughran and Ritter, 1997; Rangan, 1998; Teoh et al., 1998; Yoon and Miller, 2002a)
and political costs (Liberty and Zimmerman, 1986; Jones, 1991; Cahan, 1992; Maydew,
1997; Han and Wang, 1998). Previous researches on earning management have focused on
accrual‐based earning management and recent studies shift to real transaction‐based
earnings management.

Example research questions could include:

1. Do firms manipulate earnings through real transaction during the period of seasoned
equity offering, and how?
2. Is the relationship between accrual‐based earnings management and real
transaction‐based earnings management substitute or complement?
3. What is the relationship between earnings management and firm value?
Topic 23 Ownership Structure

Topic Background:

Study about Ownership Structure of listed companies continues to be a one of the most
important topics in corporate finance and corporate governance. Prior studies argue that
due to the dispersed ownership for companies in US and UK, the main agency problem is
the conflict between managers and outside small investors (Jensen and Meckling, 1976).
However, based on the recent studies, people find that the ownership structure for most
companies outside US and UK is not dispersed and concentrated on one or several large
shareholders, accordingly the major problem is the conflict between controlling large
shareholders and minority shareholders (Shleifer and Vishny,1997) .

Example research questions could include:

1. Do controlling shareholders expropriate the interest of minority shareholders?

2. Whether and how the ownership structure affects firm value or firm performance?
3. What is the relationship between ownership structure and CEO compensation?
4. Does ownership structure have impact on corporate investment?