INTRODUCTION

This study focuses on a research set forth to examine the linkage of competitive obsession and/or excessive competitiveness to financial impacts (credit boom/crunch) on the banking industry. Organisations concern for the survival of business at all costs has transformed into a strong credence that they can control and dominate human, physical, natural and intangible resources, thereby direct the business world now and in future. This has induced an underestimation of some immeasurable and unfathomable trends in business. Now the business world is being battered with harsh economic and financial struggle. Hence Ezer and Demetis (2007:57) states:

“Our obsession with control has become part of our validation as a species.”

At this time all countries and a huge number of firms has been impinged on, by recent the credit crunch.

1.1 Background

There are huge reasons for the competitive activities of countries, banks and Multinational Enterprises (MNE's). Some of these reasons are to maximise wealth and minimise cost. In the 1970's the banks were not highly driven by competitive force (Black and Strahan, 2002). Countries and Multinational Enterprises take advantage globalisation and free trade. However, the banking industry today has become quite competitive and involved in subprime lending. The increase in competition among banks led to less proficient screening aptitude and credits granted to less worthy customers (Rajan, 2008). In addition, MNEs engage in drastic activities across nations termed as an abuse of free trade.

The recent economic situation emerges quite troublesome for everyone. Credit concerns are now crucial and are imperative in ensuring successes in international business. This requires the aid of banks as MNEs are in battle with an unpleasant financial crisis. Nevertheless, would these banks who are also hit by the credit struggle, save themselves, talk more of aiding the MNE's or any other business and/or customers.

The financial market crisis began early in 2007 and has resulted to losses in the market and loss of confidence in financial institutions across the globe (World Economic Forum, 2008).The causes of the credit crunch are traced to a number of identified causes (Johnson and Kwak, 2009). To mention a few are subprime investments, government neglect of banking activities, and the abuse of free trade, mainly but not wholly originating from the United States. Some of these causes are still in repetition dated back to 1966 and are yet to be eradicated. Financial crisis originating in the 1960's has been re-occurring in the 70's, 80's and of present, hence, it is not a novel issue.

What is yet to be known is why the credit crunch keep re-occurring from similar causes, and the possible existence of a common element among these ‘causes' which is unseen or rather covered in a veil, that could make or break the achievement of a Company's objective. This common element could be termed extreme competitiveness or competitive obsession. It is unknown if competitive obsession could have contributed to the credit crunch.
A study and understanding of this problem could proffer solutions and thus, possibly promote international business and financial integrity on a global scale.

1.2 Research Purpose

This research is not focused on identifying and putting blames on various organisations or their activitities that might have caused the credit crunch. The aim of this study is to identify the relationship between competitiveness- its obsession and the credit crunch, and to determine whether this competitive obsession is found within the activities of the organisations that might have caused the credit crunch.

1.3 Research Questions

The questions to be researched will be principally concentrated on the grounds/motivations in which business, banks and regulators take drastic decisions and engage in dangerous activities that might have led to the credit crunch. The answers to find out will thus be:

What this ground/motivation is?
What is the existence of this ground/motivation among different institutions?
What the relationship of this ground/motivation could have to the credit crunch?

1.4 Implication of the Dissertation

This study develops a new theoretical model, which incorporates two “issues” which can be found today (competitive obsession and the credit crunch) in to the notion of global economic challenges in respect to nations and MNEs. The practical significance of this study involves proffering some guiding principle/course of action for globally competitive firms in the course of competitive/strategic decisions that is accountable. How firms react to the pressures of international competition and the chances of taking comparative advantage on the macro level has been deemed importantly stressed by Herrmann (2008), describing his research as only the beginning of a broader analysis. This study tends to continue from Herrmann's research, but relating it to the credit crunch. There are obviously exclusions in the literature, but the association of competitiveness and the credit crunch are very hardly studied in some intensity. This study tries to make the association of these two issues overt.

1.5 The Structure of the Study

2.0 LITERATURE REVIEW

2.1 Introduction

Competitiveness and the credit crunch are two different broad issues, which however are not new in the literature. Firms aspire to have a competitive advantage/edge to survive in the global market; nevertheless, the extreme cases of this competitiveness that could be very fruitful or drastic are not put in to so much consideration. Furthermore, the extreme cases of credit facility (over or under extending), might or might not have presented a favourable business condition.

2.2 Review of Studies

An attempt to review the whole issues on competitiveness and the credit crunch would be a task of great difficulty, size and strength. Both subjects have been in academic and organisational practice for a very long time. Hence, the re-evaluation of literature will highly pinpoint a survey as well as case research done. Given huge amount of data and research carried out through the years, some important studies have been omitted. Apologies are made for such omissions while, other studies which might be perceived as of less significance, are been utilised.

2.3 Sections of Review

There are large amounts of literature works significant to this study, however, this chapter will focus on:

Background : History, Present Future
Competitiveness and the Credit Crunch Defined
Competitive Obsession- Favourable or Unfavourable
National and firm competitiveness [Porters Diamond]
Competition in the Banking Industry
Government/country competitiveness

2.4 Background: History, Present and the Future

The early years of this millennium has faced corporations with credit problems connected with the boom in the stock market. As this financial catastrophe receded, came the rise and boom of the housing sector, which subsequently transformed in to the unavoidable credit crunch (Cooper, 2008). Financial crises has always come and gone. the early crisis of 1990 affecting countries like Mexico, Russia, Norway and Sweden and the Asian crisis of 1997 involving countries like South Korea, Thailand, Indonesia, Malaysia, Philippines, Singapore and Hong Kong (Allen and Gale; 2007, Nesvetailova, 2007).

The causes of these financial crises and/or credit crunch were sought after and found (Johnson and Kwak, 2009). Some of these causes were generic to some Nations while others were particular to a Nation. It is found common among nations that blames were laid on the inconsistent macroeconomic policies of government and financial institutions (Allen and Gale; 2007, Nesvetailova, 2007; Turner, 2008; Cooper, 2008). Some particular causes found in the nations like the United States (US) and United Kingdom (UK) are the sub-prime lending and housing boom (Rajan, 2008), the abuse of free trade by the promoters of free trade (Turner, 2008), and corruption in nations like Indonesia (Allen and Gale; 2007).

Can the misdeeds of government and financial institutions be associated to competitiveness? Porter (1998) portrays that competitive advantage of nations convey new government and business functions for the attainment of competitiveness and success. Constantly, government is ineffectual in whatever it gets to do as she constantly fall short in her industrial policies and in tackling the issues of competitive lead (O'Shaughnessy, 1996). Hartungi (2006), stress the competitive impacts of globalisation among nations, in the flow of labour and capital. Thus, government of nations, especially the developing ones are being threatened by competition from other nations. In consequence, these governments deregulate and hence make weak their policies for fear of alien investors relocating their businesses to another nation (Hartungi 2006; Buiter, 2007). Turner (2008) on the other hand echoes the abuse of free trade as firms utilise the benefits of free trade by carrying their dealings across various nations, with the aim to maximise their profit at the least cost. Thus, while (Hartungi; Buiter) accuses the government, Turner accuses the Multinational firms. Notwithstanding, both government and Firms actions are rational justified to be a move to beat competition.

The future of the economy, given this recent credit crunch is still bleak and insecure. There are no quick or magic solutions to this credit troubles. Most banks still hold back on granting credit and economic endeavors are still seriously threatened and extremely bad (Lorenzen, 2009).

2.5 Competitiveness and the Credit Crunch Defined

Competitiveness, which is found at the heart of business firms and nations, has always been an inevitable desire, as firms and nations struggle for survival and to outperform one another by gaining a competitive edge, comparative/absolute advantage. Given different circumstances and/or surroundings, competitiveness itself, has defined and implied differently by academic scholars/ authors. Since the theories of Adam Smith in the 1770s and Ricardo in the early 1960s, the models of Porter (1980) and Krugman (1994) prior the other current ones, accentuated by Cao (2008) and Chikán (2008) national and firm competitiveness, given the global competitive force is still obsessive. The rationale behind competitiveness stays the same; changes are found to exist on strategies engaged to accomplish it, the means of maintaining competitiveness in a rapid and constant change of business environ and processes.

In the literature, competitiveness has been widely defined. The Office of Competition and Economic Analysis (OCEA) (2009) echo, “Competitiveness means different things to different people. To an economist, it may mean how well a country is performing compared to other economies, as embodied in the standard of living and changes in national productivity. To a policy maker, it may mean how a new regulation changes the ability of affected businesses to compete. To a business owner, it may mean changes in profitability as reflected in market share for its goods and services in a low-cost market place.” Hence there are no specific or clear definition of competitiveness could be generally satisfactory, rather they are given different interpretations to best match one's requirements or task (Aiginger, 2006; Ketels, 2006; Siggel, 2006; OCEA, 2009). Garelli (2006: 3), from an economic and management perspective defines competitiveness as “a field in economics that reconciles and integrates several concepts and theories from economics and management into a series of guiding principles driving the prosperity of a nation or an enterprise.”

With regard to the credit crunch, which is the second concern, finance and credit availability has always been the blood of every enterprise that ensures the running of its business operations. The credit crunch or credit crises, financial squeeze, or financial crises have been termed differently by different nations, firms, scholars and institutions. Some authors further use these terms sequentially. Hence, for example, the credit crunch might have resulted from a capital crunch or the financial crises have led to a recession. However, the implied meaning remains the same. This financial instability has long existed, as well as economic theories such as the efficient market theories (EMT), Keynes's and the Minskyan theories and hypothesis.

Watanabe (2007:642) defines the credit crunch as “the reduction in credit supply available to borrowers, particularly bank lending supply, for some lender specific reasons.” Watanabe further describes a difference between financial crisis and the credit crunch as thus: the financial crisis involving banks breakdown, financial mismanagement and volatility, while the credit crunch involving a incidental hindrance of banks lending activities, arising from capital shortage. Similarly, Ryder (2009:76) states, “The uncertainty in the global financial markets has led to a dramatic reduction in the availability of affordable credit, or credit crunch.”

2.6 Competitive Obsession- Favourable or Unfavourable

The history of excessive competition is traced to the course of economic development and evolution of industrial formation in different countries in the globe, arising from changes in demand leading to a poor economic cycle or even recessions (Cao, 2008).

One of the strong criticisms of competitive obsession is that of Krugman (1994) and (Cao, 2008) on excessive competition. Krugman bases his arguments on three points- (1) that apprehensions on competitiveness, are as an empirical issue, baseless; (2) that the definition of economic setback as one of international competition is nevertheless striking to lots of people. Finally, that obsession with competitiveness is incorrect, dangerous, distorting domestic policies and a threat to the international economic system. Hence, thinking competitively will one-way or the other lead to bad policy making. Both Krugman and Cao, stress the misinformed and common thinking in economic theory that intensification of competition can improve economic and social welfare. Aiginger (2006) in his competitiveness defined stresses its non-exclusion of strategies to harm neighbouring countries. Thus, assumptions have been made about obsession being a negative term (Dance, 2003).

On the other hand, excessive/obsessive competitiveness has been identified to improve welfare (productivity and social) in an economy, as well as the possibility of positive externalities and spillovers (Brahm, 1995; Aiginger, 2006). Norcia and Flener (2008) in the retail experience, suggests that a means to not just survive but excel in the recent financial crisis is to become more obsessed, with the customer experience for example. Obsession with customer experience is further identified as Mr Philip Green, the owner of Bhs, achieved a historical largest profit for the company, by being obsessed with customer value, price, quality and market (Mazur, 2002). Identifying competitive obsession as good however, is dependent on it being properly focused (Dance, 2003).

This research however, neither supports nor opposes the impact or effects of competitive obsession on firms as well as on the economy, but tries to find out if competitiveness and its obsession might have resulted to the recent credit crunch.

2.7 National and Firm Competitiveness [Porters Diamond]

Chikán (2008: 24-25) presents the definition of both firm and national competitiveness:

“Firm competitiveness is a capability of a firm to sustainably fulfil its double purpose: meeting customer requirements at a profit. This capability is realised through offering on the market goods and services which customers value higher than those offered by competitors.”

And

“National competitiveness is a capability of a national economy to operate ensuring an increasing welfare of its citizens at its factor productivity sustainably growing. This capability is realised through maintaining an environment for its companies and other institutions to create, utilize and sell goods and services meeting the requirements of global competition and changing social norms.”

Chikán further stresses the existence of a structural homogeneity with the two definitions, as both are described as capabilities, sharing similar root in economic and social thinking, involving strategic governance and the thought of sustainability. Thus, Garelli (2006) stipulates that firms play their main role of achieving economic benefit, while nations provide the necessary framework to maximise the economic benefit, hence their fate is entangled and cannot be managed singly.

The interconnection of competitiveness at national and firm level has been presented by Porter's (1990) diamond framework. As concerns gaining sustainable advantage, Porter (1998:71) throws the question himself “which firms from which nations will reap them”

Porter's model is useful to analyse competitiveness and its various factors (Garelli, 2006; Chikán, 2008), thus, in this literature it will be used to analyse the banking industry. The different components of the diamond theory are used to summarise the activities of banks at national and firm level:

Factor conditions: these are factors of production as well as infrastructure. Innovation and efficiency via technology are inputs for banks competitiveness (Berger and Mester, 2001; Black and Strahan, 2002; Balgheim, 2007).

Demand conditions: customers are increasingly becoming more demanding of banks and less loyal (Balgheim, 2007). On the micro level, mainly households and businesses take on banking dealings, such as deposits, loans and other financial services (Goddard and Wilson, 2009). On the other hand, household in some countries avoid placing their savings in financial institutions and rather buy physical goods (Barth et al, 2006).

Related and supported industries: this factor takes account of cluster theory, which endorses firm's concentration. The banking systems are becoming more concentrated, and the correlation of this concentration and competition is becoming vague (Carbo et al., 2009).

Firm's strategy, structure, and rivalry: these are managerial actions and strategy in addition to domestic rivalry. as bankers detect a rival struggle to win in the inter-bank lending competition, they assume firms to show more potential than they had reasoned (Ogura, 2006)

Government: is another factor considered to determine competitiveness based on its influence on social norms and macroeconomic policy (Ketels, 2006; Chikán, 2008). However, Michael Porter disbelieves government to be a fifth determinant of competitiveness (Garelli, 2006).

Davies and Ellis (2000) summarised some of the limitations of Porter's model- to involve omissions of object of analysis, that productivity at national level is confused with industry level success; confusion of trade factors with respect to comparative advantage; flaws in methodology and mode of reasoning; and a refutation of the assertions of the competitive advantage of nations.

2.8 Competition in the Banking Industry

Competitiveness cannot extricate itself from the conception and veracity of competition (Herciu and Ogrean, 2008). Goddard and Wilson (2009) describes banking competition as vital because a failure in the market or an anti-competitive behaviour by banks could have extreme consequences on the productive effectiveness, the welfare of the consumer and the growth of the economy. This explains further the development of competition in banking to be a highly relevant exercise paving way for good policies that could effectively regulate and supervise the banking and financial services sector (Goddard and Wilson 2009; Carbó et al., 2009).

At the 1970s, there were little or no competitive strains on banks, favourable government ruling and strong barriers of entry into the industry (Berger and Mester, 2001; Black and Strahan, 2002). Nonetheless, by the early 1980s, government rulings no more favoured the industry, technology and policy changes reduced the barrier entry, and competitive strains were on the increase (Berger and Mester, 2001; Black and Strahan, 2002). The increase in competition has a two effect as depicted by (Black and Strahan, 2002)-limiting the credit accessibility to new and small businesses, while also increasing its credit accessibility to big firms that are credit worthy.

In recent times, competition has become highly on the increase, banks loosen their creditworthiness assessment in sub-prime lending and non-worthy customers get access to credit (Marquez 2002; Ogura, 2006; Rajan, 2008). The consequence of this is of three ways- reducing the impact of observational learning; reducing the credit risk engaged by every bank, while on the other hand; increasing the total risk engaged by the whole banking industry (Ogura, 2006).

2.9 Government/country competitiveness

Competitiveness is a crosscutting issue that is influenced by the decisions of many different government agencies and is subject to a strategic goal for foreign direct investment (FDI) attraction (Ketels, 2006). Siggel (2006); Herciu and Ogrean (2008) presents a view of a country competitiveness arising from the harbouring of internationally competitive firms, industries, as well as government policies and regulations. The central or apex bank of a country is an agent of government, thus, understanding the macro/micro level competitiveness and its inter-linkages to the credit squeeze would require a study of internationally competitive banks and the central bank.

3.0 RESEARCH METHODOLOGY

3.1 Macro Economic competitiveness- methods suggested by Authors

National competitiveness has been measured with indicators such as business competitiveness index of the world economic forum (WEF) (Ketels, 2006; Herciu and Ogrean, 2008; Chikán, 2008). The world economic forum (WEF) which engages its competitive analysis on global competitive index (GCI), sets out 12 determinants/ and or pillars of competitiveness – Institutions, Infrastructure, Macroeconomic Stability, Health and Primary Education, Higher education and training, Goods market efficiency, Labour market efficiency, Financial market sophistication, Technological readiness, Market size, Business sophistication, and Innovation.

3.2 Firm Level – Competition in Banking- methods suggested by Authors

The measure of competition in the banking industry is significantly subject to barriers on entry, internationally and at home (Barth et al, 2006). They stress- entry requirements and restrictions of foreign entry/ownership of domestic banks as two of the variables that could be used to qualitatively confine the degree to which competition in the banking sector is controlled. Nevertheless, some researchers [(Goddard and Wilson, 2007; 2009; Carbó et al., 2009)] draw inference from the observations of firms behaviour derived from theoretical models. Furthermore, the measurement of competitiveness differs broadly in terms of definition, scope, drivers and geographical location (Ketels, 2006). Irrespective of the measures that are put in use, the important issue is ensuring that these different measures make similar suppositions about competitive behaviour (Carbó et al., 2009).

Various studies and research has been engaged to understand the credit crunch on a macroeconomic level and on the financial aspects of firm Kang and Sawada (2008). However, the researchers environment and sense of direction in identifying and resolving problems, as well as the interested organisation and society subscribing to it, determines his/her research process or methodology (Ghuari and Gronhaug, 2005).

3.3 Adopted Methods for this Study

The main purpose of this present study is to examine the interrelationships of extreme competitiveness among firms and the financial impacts. This will be evaluated on a macro and micro level. The intended methodology will differ as well as emanate from the methodology utilised by the above reviewed researchers in a number of ways:

On the macro level, the interrelationships of firms and financial institutions will be evaluated by drawing form secondary data (GCI published by the WEF for 2008/09). For this study, however, the interrelationships will be evaluated utilising only two (2) – Institutions and Financial market sophistication, of the twelve determinants of competitiveness, rather than the combination of all the 12 determinants of competitiveness.

A collection of primary data via questionnaire: this questionnaire is intended not just to ascertain or measure competition on the bank firm level competition but going further to evaluate how this competition are driven by business factors such as changes in policy and business strategies.

To support the data collected via questionnaire will engage in an interview to give room for some of the top bank personnel to justify and give opinions on the issue of competitiveness and the credit crunch.

3.4 TRIANGULATION

This research will triangulate its primary and secondary data collection method qualitatively and quantitatively. This approach will be important when considering the reliability and validity of data, and in trying to find similarities and differences existent in these different sources of data. Thus, the result of one research strategy are cross checked against the result of another research strategy (Bryman and Bell, 2007; Saunders et al, 2007).

Thus, the methodology utilised for this research will draw data qualitatively and quantitatively. Quantitative as it will engage in statistical measure and manipulations and qualitative as it will also engage in interviews and survey reports.

3.5 FIRMS AND FINANCIALINSTITUTIONS – A SECONDARY APPROACH

The secondary approach utilised for the purpose of this research will draw data from the global competitive report of the world economic forum (WEF), as well as textbooks, articles and journals by electronic and manual means.

Drawing data from secondary sources provides a channel as to the essential research work that needs to be carried out, as well as sufficient background information to ensure a direction for research (Cooper and Schindler, 2008).

The GCI prepared by the WEF, derives its data from the executive opinion survey (EOS) as well as from other globally recognised data sources such as the International monetary fund (IMF), organisation for economic co-operation and development (OECD) and national sources.

Institutions as described by the WEF, comprises the interaction of individuals, firms and governments to create wealth and income in the economy, thus, having a potent connection on development and competitiveness.

Financial sophistication on the other hand, emphasises a thorough review of risk ensuring an appropriate creative channelling of resources use.

In order to emphasise the connection and link of Institutions and Financial market sophistication, we adopt the correlation index calculation. A way of measuring the relative strength of correlation between two variables is done through a correlation coefficient (r) (Francis, 2004). Hence the product moment correlation coefficient formula:

r = n∑xy- ∑x∑y

√({n∑x^2 )- 〖(∑x)〗^(2 )} {n∑y^(2 )- (∑y)^(2 )}

Where r = product moment coefficient formula and is a number which lies between +1 and – 1
When r is far from zero (closer to +1 or – 1), there is a strong correlation
When r is close to zero, there is a large dispersion and variables uncorrelated
r= 0 signifies zero correlation
r= 1 signifies strong/direct connection between variables.
r= – 1 signifies strong/inverted connection between variables.
Where x and y = variables to be measured,
And n = number of (x, y) variables

3.6 Test of Robustness

The essence of the robustness test is to check the stability of findings from secondary analysis done above, in the sense of whether smaller or larger deviations could prejudice performance of the model or data findings to a large extent. Thus, the existence of gross errors in a small fraction of observation is regarded as a small deviation, the main aim of robust measures being to preserve against errors (Huber and Ronchetti, 2009)

Using a dataset of over 100 countries surveyed by the world economic forum, variables on a selected number of countries are drawn. To identify a relationship between competitiveness and the credit crunch (based on two pillars afore mentioned), this research uses the “robustness/ruggedness approach”, which has been effectual in Baxter and Kouparitsas (2004) in analysing its datasets of over 100 countries. Using this approach, a variable is identified to be a robust determinant of another vis-à-vis the recent credit crunch, if the correlation coefficient of both variables is far from zero (0).

3.7 Secondary sample collection

The systematic sampling method has been selected to take in to account a sample of 15 countries, which will be used for the measurement of connection between variables. This method of sampling has been found to create ease of use, especially where there is an inexistence of a sampling frame. The procedure of the sample systematically selected is as follows:

A hundred and thirty- four (134) economies have been covered in the 2008-2009, global competitiveness report by the world economic forum (WEF). Thus sampling 15 countries will be a selection of every 134/15 (8.93th) country. If every eighth (8th) country is selected, 8 x 15= 120, so the last 14 countries will certainly not be selected. On the other hand, if every ninth (9th) country is selected, 9 x 15= 135, definitely the final country selected does not subsist(see appendix 2).

One of the disadvantages of systematic sampling is that the sampling technique is not strictly random, since the selection of a random starting point would mean all subjects are pre-determined (Francis, 2004)

However, for the sake of the study 8.93th will be approximated to 9th, as it is more free of bias compared to selecting every 8th country. The countries selected are shown in the table (1).

Table 1

Column1 S/N Country Country Rank/no
Random Starting Point 1 Japan 9
2 Australia 18
3 Saudi Arabia 27
4 Tunisia 36
5 South Africa 45
6 Latvia 54
7 Turkey 63
8 Ukraine 72
9 Egypt 81
10 Georgia 90
11 Algeria 99
12 Albania 108
13 Mali 117
14 Nepal 126
15 - 135
Source: reproduced from the global competitive report (2008-2009)

3.8 Primary Data Collection

The purpose of the research is to identify the existence of competitive obsession or excessive competitiveness particularly on the actions and reactions of banks and the government on a macro and micro level interrelationship. To draw a wide range of data on competition among these institutions, the quantitative and qualitative approach is engaged.

3.9 Quantitative research: the questionnaire

This research will use questionnaire administered on bank staffs to collect data for quantitative analysis. This aspect of research will engage its analysis univariately in frequency tables, diagrams and percentage of variables, using the Microsoft excel. Subsequent on that, the data findings will be endorsed with that of the qualitative and secondary data.

The questionnaire is purposeful on the views of bank staffs relative to competitive actions that might have contributed to the credit crunch. The questions posed will therefore indirectly address the three (3) key research questions, then similarities and differences in answers triangulated with other research methods to be utilised in the study. The use of questionnaire is thus chosen, as Saunders et al (2007) describes it to be best useful with standardised questions that can have can have similar interpretations by all participants.

The questionnaire is developed and overseen by the researcher, which is sent via mail to the respondents. It is sealed in an envelope with a return postage stamp on it. The questionnaire is prepared in Microsoft word in a structured format with manly closed end questions, yes/no or don't know and a bit open questions such as: ‘others indicate'. The distribution of the questionnaire is done in early July and returned as at early august. The distribution schedules were as follows:

Table 2

QUESTIONNAIRE
S/N BANKS BRANCH SENT RETURNED %
1 Natwest 5 20(4*5) 13 65%
2 Lloyds TSB 5 20(4*5) 9 45%
3 HSBC 5 20(4*5) 8 40%
TOTAL 15 60 30 50%

The questionnaires were distributed to 15 bank branches at the average of 4 respondents in each branch. The respondents comprised of bank staffs found at the counter and/or customer service desk. They are assumed aware of banks operating activities and their respective bank policies and strategies.

To analyse and present the findings from the research questionnaire, an exploratory method will be engaged and thus, the results will be presented in a graphical and tabular format. Presenting results in graph and tables is a central aspect of creating awareness in analysing data and makes room for a flexible method (Cooper and Schindler, 2008). A visual display of data, however has been suggested to be a starting point of analysing a data (Scheiner and Gurevitch, 2001; Saunders et al., 2007, cited Turkey (1977); Cooper and Schindler, 2008).

3.10 Qualitative research

The qualitative research will be carried out on two interviews with two bank senior staff (one of HSBC and the other of NatWest Bank).the first interview is to be done on the second week of July while the second interview was done on the last week of July. These key senior staffs were asked the same (but not all) set of questions already drafted in the questionnaire. However, the difference between the interview and the questionnaire is the structure of questions. The questionnaire were mainly containing closed-end questions; giving the respondents options to choose from, while the same questions posed on the interview were unstructured and/or open-ended, trying to get the personal view of the senior staff. The interview is intended to be in-depth in order to ensure a plethora of data is collected. This ensures that questions considered for research will be tackled in the entire process and make room to uncover other areas which has not been initially considered in the research (Cooper et al, 2008).

3.11 Research validity and reliability

The term reliability is concerned with the questions of stability in measures of a concept and validity concerned with the question of: whether or not an indication or set of indications set up to measure a concept truly evaluates that concept (Bryman and Bell, 2007). Hence, we can deduce that validity is a test of reliability.

To meet up this prerequisite, participants of the questionnaire and interview, as well as secondary materials used have been cautiously selected. The meaning and purpose of research reliability and validity has been given great attention while developing research questions to be interviewed and filled in the questionnaire. The data collection procedures, analysis and presentations have been re-visited and properly scrutinised.

Beside this supposition, is the probable fact that the way things are done now might not be the way it will be done in the future? Notwithstanding, this is not an implication that the mechanism selected is not reliable, instead that there might be a few volatility of the object considered.

3.12 The issue of Ethics

The researcher was only able to collect data on the condition that the issue of confidentiality would be followed to the last word. The recent credit crunch has brought about lack of trust in the banking industry and with lots of job cuts. Hence the issue of job security in banks has become imminent, and staffs as well as top senior staffs which were given questionnaire and interviewed respectively, were quite discreet with their identity. Their names will not be mentioned to respect their confidentiality as well as promote the issue of ethics.

4.0 DATA PRESENTATION AND ANALYSIS
4.1 Correlation Coefficient of Population drawn from secondary data

To measure the correlation coefficient of institutions and financial sophistication, the 134 countries covered by the WEF (2008-2009) will be observed. Thus
X=institutions, Y= financial market sophistication, and n= 134 (see appendix 1)

r = 134* 2493.354 - 555.23 * 582.81

√((134*2411.463)- 〖555.23〗^(2 )) (134* 2619.052- 〖582.81〗^2 )

r = 10515.84
√ (323136.1 - 308280.4) * (350952.9 - 339667.5)
r = 10515.84
√ 14855.7 * 11285.4
r = 10515.84
√ 167652517
r = 10515.84
12948.07
r = 0.812155

4.2 Findings

The result 0.812155 is farer from zero (0) and close to one (1) which indicates that there is a strong correlation between variables drawn from institutions and financial market sophistication. From this, it can be deduced that the competitive activity of institutions has a strong relationship or interconnection with that of the financial market sophistication and vice versa. Thus, the World Economic Forum (2008:4) has stressed the relationship of these pillars of competitiveness: “The central point, however, is that they are not mutually exclusive...”

From the result of our findings, we could draw that the competitive activities of MNE's (in particular banks), government institutions has partly resulted to the recent credit crunch. This is evinced as the World Economic Forum (2008) reports the relationship of the financial market crisis to financial institutions explaining their activities to have led to loss of confidence in these institutions (see chapter 1, pp)

4.3 Robustness Test: Correlation Coefficient of Secondary Sample Data

X=institutions, Y= financial market sophistication, and n= 15 (see appendix 2)
r = 15* 247.184- 57.96 * 58.37

√((15*248.104)- 〖57.96〗^(2 )) (15* 250.655- 〖58.37〗^2 )
r = 3707.76 - 3383.13
√ (3721.56 - 3359.36) * (3759.83 - 3407.06)
r = 324.63
√ 362.2* 352.77
r = 324.63
√ 127773
r = 324.63
√ 127773
r = 324.63
357.45
r = 0.90818

4.4 Coefficients compared

The result of the findings did not drift too far away (comparing 0.812155 and 0.90818 from 134 and 15 samples respectively). Both findings still present a strong correlation between institutions and financial market sophistication, and thus are robust determinant of the other.

4.5 Limitation of findings/secondary data

The findings from the analysis is only subject to two (2) of the twelve (12) pillars of competitiveness surveyed by the WEF. Thus the financial market, for example, as stressed by the World Economic Forum (2008:4): “Financial markets are only one of several important components of national competitiveness” and institutions utilised for this analysis might not be sufficient for a broad generalisation. Notwithstanding, it has been able to stress the existent of a relationship between variables and has answered the question for research purpose.

In engaging in robustness test, an incongruous small marginal should by no means be able to countermand the evidence of the bulk of the observation (Huber and Ronchetti, 2009).

The data used to draw the findings however, are secondary by nature and a limited study drawn from a secondary source frequently fail to spot a vast amount of important data (Cooper and Schindler, 2008). To bypass this limitation, a primary source of data is utilised.

4.6 Section 1 of the Questionnaire

The section one of the questionnaire attempts to look at the first research question (what the ground and motivation of business activities are?) of this dissertation. It entails seven (7) questions, which are analysed below:

Questions:

Do you find the banking industry competitive? (Kindly mark (x) to fill)

Yes
N0

If yes to question one, how competitive is it? (Kindly mark (x) to fill)

Not very competitive
Averagely competitive
Very competitive

The essence of question 1 & 2 was to find out if and how there is competitiveness in the banking industry. This is because this research is trying to find out if competitiveness is the rationale behind banks risky acts. The response to these questions are presented below in graph 1 & 2 respectively.

The response shows that only one (1) respondent did not agree to the existence of competitiveness in the banking industry. Thus, based on the responses collected from these respondents, for the purpose of this research, the banking industry is identified as competitive.

The response from question 2 as indicated in graph 2, tells how competitive the banking industry has been described. 14, 10 and 5 respondents think the industry to be very, averagely and not very competitive. Based on these responses, the competitiveness of the banking industry is found to be more than average. Notwithstanding, one of the responses have been identified missing.

Do you think competitiveness is a key success factor in the banking industry? (Kindly mark (x) to fill)

Yes
No
Don't know

The essence of this question is to understand the nature of the banking industry (if being competitive is a determinant for bank growth), as Goddard and Wilson (2009) describes, an anti-competitive behaviour of banks could lead to a market failure. The response to this question is presented below in graph 3.

from the response in graph 3, there is an indication that competitiveness is a key success factor in the banking industry, evinced by the high response rate of the ‘yes' respondents. This thus supports Goddard and Wilson (2009) description of anti-competitive behaviour to lead to a failure in the market.

How competitive do you think the banking industry was prior the credit crunch? (Kindly mark (x) to fill)

Not very competitive
Averagely competitive
Very competitive
Excessively competitive

Having identified the need and existence of competitiveness in the banking sector, question four (4) tries to measure this competitiveness before the credit crunch. Measuring it will be able to allow this research analyse Goddard and Wilson (2009) linkage of banking failure to anti-competitive behaviour. The response from this question is presented in the graph 4 below:

A higher percentage of respondents have described bank competitiveness to be averagely and very competitive prior the credit crunch.

Can you describe banks competitiveness as an obsession? (Kindly mark (x) to fill)

Yes
No
Don't know

Obsession with competitiveness could distort (Krugman, 1994), and/or as well improve (Aiginger, 2006) the economic system. Given the recent credit crunch and the economic downturn, this question tries to identify if there was an obsession with the banking competitiveness. The responses from the questionnaire are presented below in graph 5:

Thirteen respondents agree to the existence of an obsession in the banking competitive activities, where as 10 respondents disagree. Seven (7) however represents the number of do not know respondents. From these responses, a certain level of obsessed competitive activity can be found among banks. However, it does not indicate a very high level of obsession.

Do you think that nations compete among each other for foreign direct investments? (Kindly mark (x) to fill)

Yes
No
Don't know

Is attaining a competitive edge/comparative advantage a necessary criterion for attracting foreign investment? (Kindly mark (x) to fill)

Yes
No
Don't know

Questions 6 & 7 just like other questions above tries to identify the existence of competition among nations/governments, as well as identifying attaining a competitive edge is a necessary criteria for the attraction of foreign direct investment. The responses to the questions are presented in graph 6 & 7 respectively:

From the response in graph six, this research draws that there is competition among nations. Twenty (20) out of thirty- (30) questionnaires returned said yes to it, while the reaming answered no.

Just as competitiveness is a key success factor for banking industry as illustrated in graph 3, it is also a necessary criterion for the attraction of FDI among nations. This is illustrated by the high yes response in graph 7 above.

4.7 Section 2 of the Questionnaire

Section 2 of the questionnaire attempts to look at the competitive activities of banks and the government through its agents (central bank/federal reserve authority). Although the purpose of the research is not to look at the causes of the credit crunch, but on competitive activities that could be linked to the credit crunch, this section will try to find out if the causes of the credit crunch can be attributed to some careless competitive activities.

The questions to be asked are sequential in nature and will go bit by bit to uncover any competitive activity that might have resulted to the credit crunch. The questions are on identified causes of the credit crunch (from the literature), and thus the responses will be presented in brief. The uncovered competitive activity however will be discussed in detail.

Prior to the credit crunch, there was an excess of needed savings among banks(Kindly mark (x) to fill)

Yes
No
Don't know

Prior to the credit crunch, this research identifies the banking industry to be quite competitive (see graph 4). Further to banks being competitive, there is an average response of banks having an excess of needed savings as in graph 8 above.

The measure taken by the Federal Reserve's and central banks to cut excess savings was to increase the interest rates of banks. (Kindly mark (x) to fill)

Yes
No
Don't know

The response as indicated in graph 9 shows that banks did increase the interest rates of banks to cut excess savings.

The increase in interest rates led to banks losing their customers, as only few buyers were able to pay for normal mortgages. (Kindly mark (x) to fill)

Yes
No
Not sure

Graph 10 illustrates a 50:50 response of those who think/think not that banks lost their customers due increase in interest rates.

Banks in trying not to lose its customers and competition increased their volume of loans to customers. (Kindly mark (x) to fill)

Yes
No
Don't know

A higher percentage of respondents agree that that there was an increase in the volume of loans in order not to lose customers as well as competition.

The increase in volume of loans banks granted, led to an increase in the debt levels. (Kindly mark (x) to fill)

Yes
No
Don't know

A higher number of respondents agree to the rise in debt levels due to increase in the volume of loans to customers as illustrated in graph 12.

This easy finance by banks brought less credit worth customers in to mortgage market. (Kindly mark (x) to fill)

Yes
No
Not sure

The response to question 13 as indicated in the graph above, presents that unworthy credit customers were brought into the mortgage market.

Customers defaulted in their mortgage payment and banks could not easily sell the repossessed house. (Kindly mark (x) to fill)

Yes
No
Don't know

It is apparent from the response displayed in graph 14 that customers did default in their mortgage payment and repossessed houses by banks could not be easily sold.

One of the reasons for customer default is that banks did not carry out a proper risk assessment. (Kindly mark (x) to fill)

Yes
No
Don't know

From graph 15, fifteen respondents agree that banks had failed to carry put a proper risk assessment, while 14 of the respondents disagree, leaving only one respondent to be unsure.

Customer's failure to pay, given negative equity on their houses and banks difficulty in selling the reclaimed house are one of the causes of the recent credit crunch. (Kindly mark (x) to fill)

Yes
No
Don't know

All respondents as shown in graph 16 agree that the negative equity that arose in houses and the difficulty in selling these houses contributed to the credit crunch. This supports the briefings of Rajan (2008) on how the sub-prime lending contributed to the recent credit crunch.

Do you think the government and the central banks were aware of the rise in debt levels of customers? (Kindly mark (x) to fill)

Yes
No
Don't know

If yes in the answer above, go to the next question, if no skip the next question. The response to question 17 as indicated in the graph above, presents that the government and the central banks were aware of the rise in debt levels.

Why do you think the government and the central banks let the debt level rise? (Kindly mark (x)or write to fill the answer(s) that best suits you)

Because there was a credit boom
A healthy economy can be built on debt
It attracts businesses from other competitive countries
It has always been that way
Additional reason (indicate)….
Don't know

Graph18 displays that about 6 respondents think the boom in the economy might have made the government relentless on the increase in debt levels, while 2 respondents thinks it to contribute to a health economy. Five respondents however thinks the rise in debt levels not to be a novel issue, while eight respondents sees the availability of debt (being able to get loans) to attract businesses from other competitive countries. Other additional comments are below:

Debt is good, it encourages business
Not clear
Government does not run banking activities
Can't say
Business demands need to be met

One of the reasons government deregulate their policies is to create a business environment, more favourable than that of its competitive nations. (Kindly mark (x) to fill)

Yes
No
Don't know

Graph 19 illustrates most of the respondents to have agreed that government deregulate their policies to out- beat its competitive nations.

Government in a bid to create a competitive environment made some reckless policies. (Kindly mark (x) to fill)

Yes
No
Don't know

A higher response rate acknowledged that government did make some reckless policies.

These reckless policies are one of the causes of the credit crunch. (Kindly mark (x) to fill)

Yes
No
Don't know

Graph 21 illustrates most of the respondents to agree that government reckless policies have contributed to the credit crunch. Their responses supports (Allen and Gale; 2007, Nesvetailova, 2007; Turner, 2008; Cooper, 2008), blaming inconsistent macroeconomic policies of government and financial institutions.

4.8 Summary of Questionnaire analysis

Competitiveness exists as an important success factor in the banking industry, as well as among nations to achieve a comparative advantage. However not a very high level of obsession if found within the banking industry. Some findings surrounding the causes of the credit crunch in relation to competitiveness are as follows:

Banks increased their volume of loans (debt levels) in order not to lose competition as well as their customers. This subsequently led to failure in risk assessment, customers' repayment, a sub-prime crisis, and thus the credit crunch.

Governments are relentless on the rise in debt levels and deregulated their policies, to out-beat other competitive nations. Their reckless policies contributed to the credit crunch.

4.9 Limitation of the Questionnaire/analysis

The postage questionnaire is always faced with the problem of low response rate, thus only an average 50% was returned. It was quite difficult getting the response back, and the 30-returned questionnaire was only achievable after many follow-ups by the researcher sending about two further mails to the branches/respondents that have failed to reply. However, because the researcher has anticipated the low response rate, the triangulation method was considered in order to strengthen the validity and reliability of this research work. Furthermore, Saunders et al (2007) suggests it better to combine the questionnaire with other methods in a multiple-method research design.

In analysing data by exploratory means, critical points are often unidentified, objects bounded by odd level of faintness (Andrienko and Andrienko, 1999), as well as an identified misrepresentations of measurements via graphs (Beattie and Jones, 1992).

4.10 Interview Results

Do you think competitiveness is a key success factor in the banking industry?

The responses to this question from the interviewees are not quite similar, but tend draw to a similar conclusion.

“Competitiveness is an important factor to be considered in business. You see, I think in any industry where there are two or more firms, there is a struggle for survival and these firms intentionally or unintentionally tend to become competitive. This should apply to the banking industry, there are hundreds of banks out there, and none of these banks wants to be out-run” (Bank senior staff A).

“Definitely competitiveness plays an important role. We not only compete among ourselves as banks we compete as branches, and even among ourselves as staff. You know there are awards and incentives that are given to us. Some years back, our branch was awarded the best retail branch of the year. We did not just win it, we fought for it just like any other branch. The point I am trying to make is that if within ourselves we can compete, you can imagine how we struggle with other banks” (Bank senior staff B).

In summary, both bank senior staff interviewed acknowledge to the banking industry as being competitive. The findings from this question thus, support others (Marquez 2002; Ogura, 2006) that have claimed the competition to be on the increase. Another area uncovered, which is not intended for the research at the beginning, is the area of competitiveness of banks within themselves (branch of one bank competing with another branch of the same bank).

How competitive do you think the banking industry was prior the credit crunch?

From the responses from interviewee A, the banking industry at the recent times has always been very competitive irrespective of what the economic situation might be. He thus states that:

“Gone are those days when monopolistic banks are found in the industry, with little or no competition. The recent banking industry is very competitive-it was competitive before the financial crisis, and even amidst this present crisis, I think it is still competitive”

From the above response, one can deduce that there are times dated back, when there were little or no competition in the industry with a few banks dominating the industry. His response could further aid or evince (Berger and Mester, 2001; Black and Strahan, 2002), who described the banking industry at the 1970s to be free of competitive strains. Notwithstanding, interviewee B describes the competitiveness of the banking industry to be subject to particular areas of banking activities. He thus states:

I cannot really say how competitive, as banks are involved in so many business. I am no trying to pre-empt your question but, for example, banks in the UK might be more competitive than banks in Asian countries or the retail banking might be very competitive while another aspect of the banking business is not very competitive. I think the competitiveness is subject to which area you want to look at.

Can you describe banks competitiveness as an obsession?

The responses from the interview concerning banking competitiveness as an obsession, does not indicate the obsession to be totally inclusive nor exclusive in the banking activities. It is identified that there are other issues that could direct the activities of banks, such as the desire for customer satisfaction. Interviewee B thus states:

“Not really, in as much competitiveness is an important tool for success in business, we are not necessarily obsessed with it. Competitiveness alone cannot do the job; we have to look at other things such as customer satisfaction, being the leader in the market, and the quality of our services.”

However, to an extent (consciously or unconsciously), the banks have been guilty of being obsessed with their competitive activities, acting in response to the emotions of greed and fear. Furthermore, banks obsession with competitiveness has brought with it some positive elements of growth and profit making. Interviewee A thus states:

“I understand obsession to deal with strong willed emotion. This emotion can carry with it factors of greed and fear, and even positive enthusiasm, which sometimes direct the course of our business activities. Every business wants to grow and make profit. Sometimes we might have been directly or indirectly obsessed with our goals and objectives, and that keeps business going.”

Can you attribute banks and competitiveness or obsessions to the causes of the credit crunch?

The recent credit crunch has not only been attributed partly to banks competitive blunders but also to the government and politicians. Interviewee A states as follows:
“No one single sector can completely take the blame of the recent credit crunch. Like i mentioned before- we might have been obsessed with our goals and objectives, we might have some competitive blunders, but the government and politicians are guilty too, the central banks are guilty.”

Interviewee B however presents his own view:

“I think we kept doing what we were doing before, and when we were making profit, making acquisitions and growing no one complained. Things subsequently changed or got to the climax and it started telling on the banks and other financial services. Everything was a cycle. We were relentless of our risky activities because we were being competitive and at the same time trying to maximise profit.”

To present a clearer understanding of interviewee B's view, the product life cycle is used as an illustration.

Climax
Recession

The graph indicates a point at which Competitiveness and the risky activities were at its climax and subsequently the after effect of a recession. Interviewee B tries to explain that banks succeeded by doing what they were doing before, however it was no longer the same story as they found themselves in a big financial mess. This could explain Ogura (2006) point of banks having reduced the credit risk they take individually, as well as increasing the risk in the industry as a whole.

In summary, both respondents share a similar view of banks misdeeds arising from their competitive activities. However, banks competitive acts have only partly contributed to the credit crunch. Several other factors like politicians were identified.

Limitations of the qualitative research

Bryman and Bell (2007) identifies four criticisms of the qualitative research:

It is too subjective because it entails unsystematic view about what is significant.
It is nearly impossible to conduct a true replication, since there are no standard procedures.
That the scope of findings is restricted and thus impossible to know how findings can be generalised to other settings

That there is lack of transparency

However, the qualitative interview is conducted because; this research tries to understand the rationale behind banks decisions that might have contributed to the credit crunch. To all intents and purposes, it is necessary to conduct a qualitative interview where one seeks to comprehend respondents' motive for their decisions or their stance and judgment (Saunders et al, 2007)

CONCLUSIONS

There are huge reasons for the competitive activities of countries, banks and Multinational Enterprises (MNE's). Credit concerns are now crucial and are imperative in ensuring successes in international business, requiring the aid of banks as MNEs are in battle with an unpleasant financial crisis. Thus, this study develops a new theoretical model, which incorporates two “issues” which can be found today (competitive obsession and the credit crunch) in to the notion of global economic challenges in respect to nations and MNEs.

Competitiveness and the credit crunch are subjects have been in academic and organisational practice for a very long time. Hence, the re-evaluation of literature will highly pinpoint a survey as well as case research done. The sections reviewed in the literature are the background study, definition of competitiveness and the credit crunch, competitive obsession, national and firm competitiveness [Porter's diamond], competition in the banking industry, and government/country competitiveness.

On the macro level, the interrelationship of firms and financial institutions is evaluated by drawing form secondary data (GCI published by the WEF for 2008/09). To add to the macro level as well as draw from a micro level is the collection of primary data via questionnaire and interview. The aim is to give room for some of the top bank personnel to justify and give opinions on the issue of competitiveness and the credit crunch.

There is a significant relationship between institutions and the financial market, both identified as pillars of competitiveness. Banks misdeeds arise from their competitive activities; however, these competitive acts have only partly contributed to the credit crunch. Competition in the banking industry is on the increase, but not on a high level of obsession. The increase in the volume of loans and governments relentlessness on the rise in debt levels and deregulation of policies are some of surrounding the causes of the credit crunch in relation to competitiveness.

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Appendix

Country variable summations
Country/Economy X Y XY

United States 4.93 5.61 27.6573 24.3049 31.4721
Switzerland 5.97 5.26 31.4022 35.6409 27.6676
Denmark 6.18 5.82 35.9676 38.1924 33.8724
Sweden 6.05 5.65 34.1825 36.6025 31.9225
Singapore 6.19 5.94 36.7686 38.3161 35.2836
Finland 6.18 5.51 34.0518 38.1924 30.3601
Germany 5.65 5.35 30.2275 31.9225 28.6225
Netherlands 5.76 5.57 32.0832 33.1776 31.0249
Japan 4.99 4.75 23.7025 24.9001 22.5625
Canada 5.5 5.58 30.69 30.25 31.1364
Hong Kong SAR 5.78 6.19 35.7782 33.4084 38.3161
United Kingdom 4.99 5.81 28.9919 24.9001 33.7561
Korea, Rep. 4.95 4.85 24.0075 24.5025 23.5225
Austria 5.72 5.01 28.6572 32.7184 25.1001
Norway 5.93 5.51 32.6743 35.1649 30.3601
France 5.1 5.19 26.469 26.01 26.9361
Taiwan, China 4.67 4.83 22.5561 21.8089 23.3289
Australia 5.72 5.76 32.9472 32.7184 33.1776
Belgium 5.15 5.25 27.0375 26.5225 27.5625
Iceland 5.93 5.31 31.4883 35.1649 28.1961
Malaysia 4.91 5.4 26.514 24.1081 29.16
Ireland 5.39 5.68 30.6152 29.0521 32.2624
Israel 4.53 5.46 24.7338 20.5209 29.8116
New Zealand 5.81 5.87 34.1047 33.7561 34.4569
Luxembourg 5.68 5.39 30.6152 32.2624 29.0521
Qatar 5.47 5.25 28.7175 29.9209 27.5625
Saudi Arabia 4.75 4.22 20.045 22.5625 17.8084
Chile 4.73 5.05 23.8865 22.3729 25.5025
Spain 4.59 4.93 22.6287 21.0681 24.3049
China 4.18 3.64 15.2152 17.4724 13.2496
United Arab Emirates 5.37 4.77 25.6149 28.8369 22.7529
Estonia 4.85 5.08 24.638 23.5225 25.8064
Czech Republic 3.87 4.65 17.9955 14.9769 21.6225
Thailand 4.17 4.6 19.182 17.3889 21.16
Kuwait 4.46 4.59 20.4714 19.8916 21.0681
Tunisia 5.15 4.09 21.0635 26.5225 16.7281
Bahrain 4.89 5.5 26.895 23.9121 30.25
Oman 5.21 4.6 23.966 27.1441 21.16
Brunei Darussalam 4.65 4.15 19.2975 21.6225 17.2225
Cyprus 5.03 5.11 25.7033 25.3009 26.1121
Puerto Rico 4.56 5.04 22.9824 20.7936 25.4016
Slovenia 4.4 4.67 20.548 19.36 21.8089
Portugal 4.75 4.71 22.3725 22.5625 22.1841
Lithuania 4.19 4.5 18.855 17.5561 20.25
South Africa 4.55 5.22 23.751 20.7025 27.2484
Slovak Republic 3.85 5.04 19.404 14.8225 25.4016
Barbados 5.19 4.8 24.912 26.9361 23.04
Jordan 4.98 4.61 22.9578 24.8004 21.2521
Italy 3.68 3.9 14.352 13.5424 15.21
India 4.23 4.98 21.0654 17.8929 24.8004
Russian Federation 3.29 3.6 11.844 10.8241 12.96
Malta 4.88 5.36 26.1568 23.8144 28.7296
Poland 3.63 4.28 15.5364 13.1769 18.3184
Latvia 4.05 4.8 19.44 16.4025 23.04
Indonesia 3.89 4.48 17.4272 15.1321 20.0704
Botswana 4.73 4.79 22.6567 22.3729 22.9441
Mauritius 4.68 5.02 23.4936 21.9024 25.2004
Panama 3.88 5.17 20.0596 15.0544 26.7289
Costa Rica 4.35 4.24 18.444 18.9225 17.9776
Mexico 3.49 4.3 15.007 12.1801 18.49
Croatia 3.82 4.37 16.6934 14.5924 19.0969
Hungary 3.94 4.42 17.4148 15.5236 19.5364
Turkey 3.72 4.11 15.2892 13.8384 16.8921
Brazil 3.56 4.36 15.5216 12.6736 19.0096
Montenegro 4.07 4.96 20.1872 16.5649 24.6016
Kazakhstan 3.71 3.81 14.1351 13.7641 14.5161
Greece 4.1 4.29 17.589 16.81 18.4041
Romania 3.63 4.42 16.0446 13.1769 19.5364
Azerbaijan 4.05 3.89 15.7545 16.4025 15.1321
Vietnam 3.87 4.06 15.7122 14.9769 16.4836
Philippines 3.44 4.09 14.0696 11.8336 16.7281
Ukraine 3.26 4 13.04 10.6276 16
Morocco 4.05 3.88 15.714 16.4025 15.0544
Colombia 3.66 4.06 14.8596 13.3956 16.4836
Uruguay 4.55 3.95 17.9725 20.7025 15.6025
Bulgaria 3.28 4.18 13.7104 10.7584 17.4724
Sri Lanka 3.92 4.34 17.0128 15.3664 18.8356
Syria 4.2 3.28 13.776 17.64 10.7584
El Salvador 3.46 4.23 14.6358 11.9716 17.8929
Namibia 4.59 4.54 20.8386 21.0681 20.6116
Egypt 4.25 3.68 15.64 18.0625 13.5424
Honduras 3.69 4.02 14.8338 13.6161 16.1604
Peru 3.45 4.68 16.146 11.9025 21.9024
Guatemala 3.48 3.85 13.398 12.1104 14.8225
Serbia 3.4 3.94 13.396 11.56 15.5236
Jamaica 3.66 4.44 16.2504 13.3956 19.7136
Gambia, The 4.73 3.96 18.7308 22.3729 15.6816
Argentina 2.94 3.46 10.1724 8.6436 11.9716
Macedonia, FYR 3.58 4.04 14.4632 12.8164 16.3216
Georgia 3.89 4.06 15.7934 15.1321 16.4836
Libya 3.93 2.95 11.5935 15.4449 8.7025
Trinidad and Tobago 3.44 4.57 15.7208 11.8336 20.8849
Kenya 3.54 4.68 16.5672 12.5316 21.9024
Nigeria 3.42 4.53 15.4926 11.6964 20.5209
Moldova 3.55 3.69 13.0995 12.6025 13.6161
Senegal 3.69 3.6 13.284 13.6161 12.96
Armenia 3.5 3.68 12.88 12.25 13.5424
Dominican Republic 3.14 3.71 11.6494 9.8596 13.7641
Algeria 3.45 2.94 10.143 11.9025 8.6436
Mongolia 3.08 3.63 11.1804 9.4864 13.1769
Pakistan 3.51 4.24 14.8824 12.3201 17.9776
Ghana 4.02 4.28 17.2056 16.1604 18.3184
Suriname 3.47 3.54 12.2838 12.0409 12.5316
Ecuador 2.92 3.21 9.3732 8.5264 10.3041
Venezuela 2.41 3.5 8.435 5.8081 12.25
Benin 3.67 3.72 13.6524 13.4689 13.8384
Bosnia and Herzegovina 3.06 4 12.24 9.3636 16
Albania 3.32 3.7 12.284 11.0224 13.69
Cambodia 3.44 2.96 10.1824 11.8336 8.7616
Côte d'Ivoire 2.82 3.56 10.0392 7.9524 12.6736
Bangladesh 2.98 4.05 12.069 8.8804 16.4025
Zambia 3.91 4.51 17.6341 15.2881 20.3401
Tanzania 3.81 3.86 14.7066 14.5161 14.8996
Cameroon 3.24 3.21 10.4004 10.4976 10.3041
Guyana 3.23 3.8 12.274 10.4329 14.44
Tajikistan 3.74 3.26 12.1924 13.9876 10.6276
Mali 3.73 3.35 12.4955 13.9129 11.2225
Bolivia 2.66 3.37 8.9642 7.0756 11.3569
Malawi 4.33 4.4 19.052 18.7489 19.36
Nicaragua 3.2 3.72 11.904 10.24 13.8384
Ethiopia 3.8 3.11 11.818 14.44 9.6721
Kyrgyz Republic 3.06 3.53 10.8018 9.3636 12.4609
Lesotho 3.26 3.42 11.1492 10.6276 11.6964
Paraguay 2.64 3.81 10.0584 6.9696 14.5161
Madagascar 3.52 3.09 10.8768 12.3904 9.5481
Nepal 3.13 3.69 11.5497 9.7969 13.6161
Burkina Faso 3.82 3.65 13.943 14.5924 13.3225
Uganda 3.27 3.7 12.099 10.6929 13.69
Timor-Leste 3.03 3.05 9.2415 9.1809 9.3025
Mozambique 3.27 3.27 10.6929 10.6929 10.6929
Mauritania 3.42 3.13 10.7046 11.6964 9.7969
Burundi 3.03 2.76 8.3628 9.1809 7.6176
Zimbabwe 3 3.92 11.76 9 15.3664
Chad 2.54 2.8 7.112 6.4516 7.84
Total 555.23 582.81 2493.354 2411.463 2619.052
X= Institutions
Y= Financial market sophisitication
n = 134

Sample Country variable summations
Country Country Rank/no x y xy

Japan 9 4.99 4.75 23.7025 24.9001 22.5625
Australia 18 5.72 5.76 32.9472 32.7184 33.1776
Saudi Arabia 27 4.75 4.22 20.045 22.5625 17.8084
Tunisia 36 5.15 4.09 21.0635 26.5225 16.7281
South Africa 45 4.55 5.22 23.751 20.7025 27.2484
Latvia 54 4.05 4.8 19.44 16.4025 23.04
Turkey 63 3.72 4.11 15.2892 13.8384 16.8921
Ukraine 72 3.26 4 13.04 10.6276 16
Egypt 81 4.25 3.68 15.64 18.0625 13.5424
Georgia 90 3.89 4.06 15.7934 15.1321 16.4836
Algeria 99 3.45 2.94 10.143 11.9025 8.6436
Albania 108 3.32 3.7 12.284 11.0224 13.69
Mali 117 3.73 3.35 12.4955 13.9129 11.2225
Nepal 126 3.13 3.69 11.5497 9.7969 13.6161
- 135 0 0 0 0 0
Total 57.96 58.37 247.184 248.104 250.655
X= Institutions
Y= Financial market sophisitication
n = 15