scholarly journals Have EU derivative policy reforms since the 2008 financial crisis been designed effectively?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Charles Fergus Graham
Keyword(s):  
Financial Crisis ◽  
Heterogeneous Firms ◽  
Public Disclosure ◽  
The European Union ◽  
Policy Reforms ◽  
2008 Financial Crisis ◽  
Content Type ◽  
Reporting Requirements ◽  
Firm Compliance ◽  
The 2008 Financial Crisis

Purpose In response to the 2008 financial crisis, the European Union (EU) comprehensively restructured its derivative regulation. A key component of this new framework is a reporting obligation for every derivative trade. As the reporting requirement does not involve public disclosure of the information, existing academic analysis on reporting regulations to-date, which focusses on public disclosure, is limited in predicting the effectiveness of the reform. This paper aims to assess whether the reform has been designed effectively based on the regulatory setup in the UK. Design/methodology/approach Framing the reporting regulation as a moral hazard problem with asymmetric information, this paper uses a game-theoretical approach to evaluate whether the new derivative reporting obligation effectively induces firm compliance. I also discuss potential extensions of the derivative reporting model, with particular emphasis on how the framework could account for heterogeneous firms and different regulatory tools. Findings Based on the theoretical analysis, this paper finds that while firms are unlikely to comply fully with derivative reporting requirements, it is possible to induce relatively high firm compliance. Although this does not mean we are immune from another financial crisis, the derivative reporting requirements should equip EU regulators to monitor a more transparent and secure derivatives market. Originality/value This paper provides a theoretical foundation for further study of post-crisis derivatives reforms. In particular, the implications of the model point to an empirical strategy to test the accuracy of the model.

The role of customers and employees in the buffer effect of corporate social responsibility in times of crisis

2020 ◽  
Vol 46 (7) ◽  
pp. 955-975 ◽  
Author(s):  
Dorra Ellouze
Keyword(s):  
Financial Crisis ◽  
Negative Impact ◽  
Employee Productivity ◽  
Negative Events ◽  
Buffer Effect ◽  
2008 Financial Crisis ◽  
Content Type ◽  
Cooperative Relationships ◽  
The 2008 Financial Crisis

PurposeThe purpose of the paper is to investigate the role of customers and employees in the buffer effect of CSR around the 2008 financial crisis in the European context.Design/methodology/approachUsing a sample of 323 European firms listed in STOXX Europe 600 Index, different models are estimated to test whether the effect of CSR ratings on firms' relationships with their customers and employees could be different during the 2008 financial crisis relative to the pre-crisis and post-crisis periods.FindingsThe paper shows that CSR rating has a significantly negative impact on firms' accounts receivable and a significantly positive effect on employee productivity during the crisis period (from 2007 to 2009). However, there is no significant effect of CSR rating during the non-crisis periods. These results suggest that during negative events, customers are willing to continue supporting high-CSR firms by paying their invoices faster. Furthermore, these firms benefit from higher productivity of their employees who are willing to work harder in periods of uncertainty.Research limitations/implicationsFirms should invest in CSR practices to maintain strong and cooperative relationships with their customers and employees. Also, investors should choose firms engaging in more social capital. Moreover, policymakers should encourage implementing CSR practices which act as an insurance-like protection in times of negative events.Originality/valueThis paper adds to the previous studies by investigating whether the cooperative role of customers and employees can explain the buffer role of CSR around the crisis. Furthermore, it considers companies located in several European countries for a long period (from 2004 to 2012) to compare periods of crisis and non-crisis.

Governmental management by trust communication: German organizational rhetoric in the 2008 financial crisis

2015 ◽  
Vol 23 (1) ◽  
pp. 33-45
Author(s):  
Jan C. L. König ◽  
Klaus-Peter Wiedmann
Keyword(s):  
Financial Crisis ◽  
Quantitative Research ◽  
Organizational Rhetoric ◽  
2008 Financial Crisis ◽  
Content Type ◽  
Rhetorical Action ◽  
The 2008 Financial Crisis ◽  
The Government ◽  
Governmental Management ◽  
Practical Implications

Purpose – The purpose of the authors of this paper is to observe the German Government’s rhetorical communication measurements during the 2008 financial crisis. Design/methodology/approach – The authors compiled approaches of organizational rhetoric and pragma-linguistics first to offer a consistent concept and method for observation and analysis. Later on, they give an overview of the problem of trust and confidence according to Luhmann’s approach and its meaning for crisis rhetoric and marketing and managing approaches. Findings – In the following case study, the authors offer a rhetorical text analysis, combined with a pragmatic perspective of accompanying legal measurements of the government as non-verbal communication. The authors show how the government re-established trust among German consumers and eventually overcame the crisis mainly by rhetorical action. Research limitations/implications – Regarding future crises, the authors suggest that the interaction of trust, financial markets and rhetorical approaches could be better understood. This could include both more quantitative research and qualitative rhetorical approaches. Practical implications – Practical implications clearly show the importance of rhetorical education, especially for crises. This counts for governmental managers, as well as entrepreneurs and spokesmen. Social implications – The authors also revealed the problem of unjustified trust which can become dangerous for social welfare, even if it is only produced by misleading communication. This problem can only be solved by a careful public regulation. Originality/value – Finally, the authors could describe the importance of effective language and communication as a tool for the German Government in the financial crisis in 2008. It can be also described as an example for decision-makers in similar situations.

Bad assets options and bank resolution in Europe

2015 ◽  
Vol 16 (5) ◽  
pp. 486-497 ◽  
Author(s):  
Karsten Paetzmann
Keyword(s):  
Financial Crisis ◽  
Study Data ◽  
Banking Union ◽  
2008 Financial Crisis ◽  
Content Type ◽  
Reduction Strategies ◽  
The 2008 Financial Crisis ◽  
Bad Assets ◽  
Case Study Data

Purpose – This paper analyzes the new EU Bank Recovery and Resolution Directive (BRRD) to determine the level of guidance on instruments to wind-down bad asset portfolios of asset management vehicles. In the absence of such detailed guidance stipulated by the BRRD, the aim is to provide certain practical guidance to future resolution planning and execution. Design/methodology/approach – This paper draws upon experience from portfolio reduction strategies applied at European bad banks in the aftermath of the 2008 financial crisis. For illustration purposes, the paper use case study data from a bad bank located in the eurozone. Findings – For the new European Commission, implementation and enforcement of the Banking Union within the eurozone is currently a key priority. Present efforts are mainly directed towards minimum technical standards. However, the fundamental question of how to orderly unwind a bad assets portfolio without the usage of public funds remains partly addressed only. While a uniform approach to any bad asset does not seem to be applicable, certain lessons learned from previous financial crises may contribute to a selection of reduction strategies. Research limitations/implications – This paper draws upon experience from portfolio reduction strategies applied at European bad banks in the aftermath of the 2008 financial crisis. It includes case study data from the wind-down of a eurozone bad bank detailing the asset reduction strategies achieved so far. Such per asset class wind-down patterns have not been published and commented on in academia so far.

The effect of holding company affiliation on bank risk and the 2008 financial crisis

2017 ◽  
Vol 34 (1) ◽  
pp. 105-121 ◽  
Author(s):  
Krishnan Dandapani ◽  
Edward R. Lawrence ◽  
Fernando M. Patterson
Keyword(s):  
Financial Crisis ◽  
Univariate Analysis ◽  
Mortgage Lending ◽  
Capital Adequacy ◽  
2008 Financial Crisis ◽  
Content Type ◽  
Holding Company ◽  
The 2008 Financial Crisis ◽  
Home Mortgage ◽  
Level Of Risk

Purpose The organizational form of financial institutions is related to their level of risk, leverage, liquidity and capitalization. High level of risk and leverage and lower levels of liquidity and capitalization are considered to be the root causes of the 2008 financial crisis. The purpose of this paper is to investigate if banks affiliated to holding company structure contributed more to the root causes of crisis than unaffiliated banks. Design/methodology/approach The paper isolates the effect of holding company association by restricting the sample to one-bank holding companies and individual banks. A comparative analysis of independent and holding company-affiliated banks is performed. Univariate analysis and multivariate regressions are used to compare the risk, leverage, liquidity and capitalization of affiliated and independent banks. Findings The paper finds that holding company affiliation is linked to several root causes of the 2008 financial crisis. Specifically, holding company affiliation results in higher levels of home mortgage loans underwritten and underperforming, higher leverage, lower liquidity and lower capitalization for the subsidiary bank. Practical implications The paper demonstrates that affiliated banks use their higher leveraged positions to engage in riskier home mortgage lending, sacrificing both liquidity and capital adequacy. These findings can help policy makers to focus on the group of banks that are part of holding company affiliation and implement such policies and regulations so as to avoid any re-occurrence of financial crisis. Originality/value This paper is the first to link the structural differences in banks to the root causes of financial crisis and to isolate the effect of holding company affiliation through sample selection. The paper will be valued to other researchers who try to isolate the effect of holding company affiliation and those studying the causes of the financial crisis of 2008.

scholarly journals Competitiveness in the European Consolidated Banking Sector After the 2008 Financial Crisis

2020 ◽  
Vol 20 (4) ◽  
pp. 431-444
Author(s):  
Senanu Kwasi Klutse
Keyword(s):  
Financial Crisis ◽  
Market Integration ◽  
Banking Sector ◽  
Level Playing Field ◽  
The European Union ◽  
2008 Financial Crisis ◽  
Playing Field ◽  
Fixed Assets ◽  
The 2008 Financial Crisis ◽  
Capital Expense

AbstractThe constitutional conception of market integration within the European Union entails creating a level playing field for competition in the consolidated banking sector. The financial crisis of 2008 brought with it the need to proceed with care as it rolled back the gains of improving competitive conditions in the financial sector. Even though a lot of studies have investigated competitive conditions prior to the crisis, the same cannot be said of periods after the crisis. Using both structural and non-structural measures of competitive conditions, this study found that the consolidated banking sector in Europe shows signs of a monopolistic competitive market structure based on its revenue and cost measures. As five countries – United Kingdom, France, Germany, Spain, Italy – control about 70 per cent of total assets in the consolidated banking sector. The capital expense to fixed assets and total assets in the Europe area were found to be negatively related to measures of profitability in the sector. They were indicating that the accumulation of assets eats into the incomes of banks in the sub-region, whereas bank exposures may be affecting bank profits.

M&A activity shows perils of misvaluation

2016 ◽  
Keyword(s):  
Financial Crisis ◽  
International Expansion ◽  
Macroeconomic Performance ◽  
2008 Financial Crisis ◽  
Content Type ◽  
Percentage Points ◽  
The 2008 Financial Crisis

Significance The deal is the largest of 2016, a year in which acquisition premiums are the highest in a decade. However, this year has also seen the most cancelled transactions since the 2008 financial crisis. Volatility within the macro environment highlights the risks to these transactions, where a misvaluation of a few percentage points can cost billions of dollars. Impacts International expansion multiplies the markets whose macroeconomic performance must be modelled. For example, not anticipating the commodities bust would have overvalued companies operating in markets as diverse as Australia and Zambia. Upside risks increase for investors who accurately forecast that the market consensus has not priced in necessary information.

Corporate governance, European bank performance and the financial crisis

2019 ◽  
Vol 34 (3) ◽  
pp. 338-371
Author(s):  
Mohamed A. Ayadi ◽  
Nesrine Ayadi ◽  
Samir Trabelsi
Keyword(s):  
Financial Crisis ◽  
Risk Taking ◽  
Data Availability ◽  
Bank Performance ◽  
Governance Mechanisms ◽  
2008 Financial Crisis ◽  
Content Type ◽  
Euro Zone ◽  
The 2008 Financial Crisis ◽  
The Impact

PurposeThis paper aims to analyze the effects of internal and external governance mechanisms on the performance and risk taking of banks from the Euro zone before and after the 2008 financial crisis.Design/methodology/approachTo avoid macroeconomic problems and shocks and because of data availability, the authors select some countries of the Euro zone, namely, France, Belgium, Germany and Finland, during the 2004-2009 period. These countries share similar macroeconomic environments (unemployment, inflation and economic growth rates). All the data relating to the banks are manually drawn from the supervising reports submitted to banks and are available on the banks’ websites and/or on that of the AMF website. The banks included in our sample are drawn from the list of European central banks onwww.ecb.intFindingsThe empirical results show that banks undertake tradeoffs between different governance mechanisms to alleviate the intensity of the agency conflicts between the shareholders and managers. The findings also confirm that internal mechanisms and capital regulations are complementary and significantly impact bank performance.Research limitations/implicationsThis analysis can be extended through studying the interaction between bondholders’ governance and shareholders’ governance and their impact on the 2008 financial crisis.Practical implicationsThe changes in banking governance help banks find a useful and necessary way to avoid ill-considered risks that can cause a systemic risk. Therefore, some conditions should be met so that banking governance can contribute to the economic development.Social implicationsCulture and mentality of good banking governance must grow as much as possible through awareness-raising, training, promotion, recognition of performance, enhancing procedure transparency and stability of good banking governance and regulations, strengthening the national capacity to fight against corruption, and preventive mechanisms.Originality/valueThis paper complements previous studies, mainly those of Andres and Vallelado (2008) who examine the impact of the components of the board on banking performance and of Laeven and Levine (2009) who estimate the combined effect of regulatory and ownership structure on the risk-taking of each bank.

Free market madness and human nature

Humanomics ◽  
2015 ◽  
Vol 31 (1) ◽  
pp. 88-103 ◽  
Author(s):  
Necati Aydin
Keyword(s):  
Financial Crisis ◽  
Human Nature ◽  
Free Market ◽  
2008 Financial Crisis ◽  
Content Type ◽  
Comprehensive Theory ◽  
Free Market Capitalism ◽  
The 2008 Financial Crisis ◽  
Theory Of Human Nature ◽  
Market Capitalism

Purpose – This paper aims to discuss the crises of free market capitalism in terms of its understanding of human nature. It reveals how recent market madness can be attributed to certain elements of human nature. Design/methodology/approach – The paper uses a conceptual and philosophical approach to analyze crises of free market capitalism. It links both success and failure of capitalism to its understanding of human nature. It compares and contrasts economic assumptions of human nature in conventional and Islamic economics. It attempts to explain the 2008 financial crisis through a comprehensive theory of human nature. Findings – It sheds some light on the irrational aspect of human nature as the driving factor behind the 2008 financial crisis. It elaborates on the importance of knowing self for knowing human decisions in free market economy. It concludes with the need for a comprehensive theory of human nature to predict and prevent irrational and irresponsible behaviors of populist politicians, greedy capitalists and conspicuous consumers. The paper also reflects on the 2013 Nobel Prize in economics as a victory for the study of human nature. Originality/value – The paper offers a new perspective to understand crises of free market capitalism.

Sign in / Sign up

Export Citation Format

Share Document