Financial regulations, risk management and value creation in financial institutions: evidence from Europe and USA

1.3 Research Questions

From a general point of view, there always exist some research questions to help in achieving the aims and objectives of any research. This therefore implies that it is not only important but very imperative in identifying some key questions for which the answers will be sought through out the research. It is assumed that when questions are well defined and precise, it is easier and helps the researcher in determining the scope of the study thereby remaining focus on this scope (Porter, 2003). It is evident that these research questions help the researcher in

writing the literature review, tailoring the study framework as well as setting up what techniques to apply and their analysis. In this regard, this research aims at answering the following questions:

Question 1: What types of risks affect financial performance of financial institutions?

Question 2: What financial regulations methods can be used and how will they be implemented?

Question 3: How financial institutions manage risks and create value?

Question 4: What are the key factors affecting preferences for managing risks, financial regulations and value creation?

Question 5: What is the perception of managers regarding risk management, financial regulations and value creation approaches used?

Question 6: What value creation strategies are to be used in financial institutions that will fully incorporate risks management and financial regulations and how successful will these strategies be?

1.4 Aims and Objectives

Specifically, this research aims at critically analysing how financial institutions deal with financial regulations, risk management and value creation, hence the research aims at achieving the following objectives:

. Explaining the meanings of financial regulations, risk management and value creation.

. Reasons for financial regulations, risk management and value creation.

. Methods of financial regulations, risk management and value creation.

? Identifying and determining risks that affect financial performance of financial institutions.

? Examining financial regulations, managing risks and value creation approaches of financial institutions.

? Identifying key factors hindering financial regulations, risk management and value creation strategies

? Examining the perception behind managers behaviour towards financial regulations, risk management and value creation approaches

. Recommendation of the importance of financial regulations, risk management and value creation in financial institutions.

1.5 Hypotheses

According to Lind et al, 2005, a hypothesis could be defined as a statement made with reference to a population parameter which is developed for testing purposes. Although, Zikmund, 2003, looks at hypothesis from a different point of view where he sees hypothesis as an unproven proposition that explains certain facts tentatively and these facts can be tested empirically. Hypotheses are usually expressed in two forms: the null and the alternative forms (the exact opposite of the null hypotheses),whereby the null hypothesis is usually a more naturally conservative and dogmatic statement about the status quo which is tested using statistical evidence and helps in rejecting any contrary propositions not tied to it. The null hypothesis is usually denoted by (H_o) with the alternative denoted by (H1).

Therefore for the purpose of this research, the hypotheses shall be stated as follows:

H_o: Financial Regulations, Risk Management and Value Creation are the main factors influencing investment decisions in financial institutions.

H1: Financial Regulations, Risk Management and Value Creation, are not the main Behavioural Factors influencing investment decisions in financial institutions.

Researches in behavioural finance show that the process of decision-making is subject to a number of cognitive illusions which are grouped into heuristic (overconfidence, gambler's fallacy as well as availability bias) decision processes and the prospect theory (regret and loss aversion). These behavioural factors equally play an important role when the investment decision-making process is concern.