Long-Term Scarring from the Financial Crisis

2009 ◽  
Vol 210 ◽  
pp. 36-38 ◽  
Author(s):  
Ray Barrell
Keyword(s):  
Financial Crisis ◽  
Financial Crises ◽  
Asset Prices ◽  
Banking Sector ◽  
Oecd Countries ◽  
Risk Premia ◽  
Crisis Period ◽  
Permanent Effect ◽  
Output Costs

It is useful to look at the distinction between transitory and permanent effects of a crisis. Financial crises normally bring on a recession, and the output costs can be large, as Hoggarth and Saporta (2001) discuss. In the majority of cases since 1970 in the OECD countries output returns to its trend level and there is no permanent effect. However, there may have been a permanent scar on the level of output in Japan after its crisis in the early 1990s, making the crisis and subsequent recession much more costly. This may reflect the nature and length of the crisis, as the banking sector was left to flounder for some years before its rescue toward the end of the crisis period. This appears to have left a permanent scar because risk premia were subsequently higher, and real asset prices have not fully recovered.

Intermediary Asset Pricing and the Financial Crisis

2018 ◽  
Vol 10 (1) ◽  
pp. 173-197 ◽  
Author(s):  
Zhiguo He ◽  
Arvind Krishnamurthy
Keyword(s):  
Asset Pricing ◽  
Financial Crisis ◽  
Empirical Evidence ◽  
Asset Prices ◽  
Financial Intermediation ◽  
Risk Premia

Intermediary asset pricing understands asset prices and risk premia through the lens of frictions in financial intermediation. Perhaps motivated by phenomena in the financial crisis, intermediary asset pricing has been one of the fastest-growing areas of research in finance. This article explains the theory behind intermediary asset pricing and, in particular, how it is different from other approaches to asset pricing. This article also covers selective empirical evidence in favor of intermediary asset pricing.

Financial Crises and Risk Premia*

2017 ◽  
Vol 132 (2) ◽  
pp. 765-809 ◽  
Author(s):  
Tyler Muir
Keyword(s):  
Financial Crises ◽  
Asset Prices ◽  
Risk Premia ◽  
Expected Returns ◽  
Behavioral Models ◽  
Pricing Models ◽  
Aggregate Consumption ◽  
Consumption Volatility ◽  
International Panel ◽  
Asset Pricing Models

Abstract I analyze the behavior of risk premia in financial crises, wars, and recessions in an international panel spanning over 140 years and 14 countries. I document that expected returns, or risk premia, increase substantially in financial crises, but not in the other episodes. Asset prices decline in all episodes, but the decline in financial crises is substantially larger than the decline in fundamentals so that expected returns going forward are large. However, drops in consumption and consumption volatility are fairly similar across financial crises and recessions and are largest during wars, so asset pricing models based on aggregate consumption have trouble matching these facts. Comparing crises to “deep” recessions strengthens these findings further. By disentangling financial crises from other bad macroeconomic times, the results suggest that financial crises are particularly important to understanding why risk premia vary. I discuss implications for theory more broadly and discuss both rational and behavioral models that are consistent with the facts. Theories where asset prices are related to the health of the financial sector appear particularly promising.

scholarly journals BANKING SECTOR MODERNIZATION(SPANISH RECIPE)

2017 ◽  
pp. 47-54
Author(s):  
Timofey Malashenko
Keyword(s):  
Financial Crisis ◽  
Economic Crisis ◽  
National Economy ◽  
Banking Sector ◽  
Banking System ◽  
Crisis Period

The aim of the research is to analyze transformation of the Spanish banking sector after the financial crisis of the year 2008. The author examines a hypothesis that banking system played an important role in the development of Spain’s economy. Spain’s banking sector was substantially transformed during the economic crisis, and now serves as a prerequisite for development of Spain’s national economy during post crisis period

scholarly journals The relationship between financial crisis and earnings management: Some evidence from the Italian context

2019 ◽  
Vol 17 (1) ◽  
pp. 325-335 ◽  
Author(s):  
Francesco Grimaldi
Keyword(s):  
At Risk ◽  
Financial Crisis ◽  
Earnings Management ◽  
Financial Crises ◽  
Macroeconomic Factors ◽  
Crisis Period ◽  
Macroeconomic Conditions ◽  
Investigation Period ◽  
Italian Context ◽  
The Relationship

The aim of this research is to investigate the relationship between the financial crisis and earnings management. Despite the wealth of research examining earnings management, we still have much to learn about the effects of macroeconomic factors on accounting discretional decisions; the recent financial crises may be one of such factors. Particularly, this study aims at investigating whether, in the Italian context, the precarious macroeconomic conditions and the consequent difficulties suffered by listed companies have constituted an incentive to implement earnings management or not. The research is based on a sample of 89 non-financial listed Italian companies and an investigation period (2005-2016) split out into three different sub-periods: a pre-crisis period (2005-2008), a crisis period (2009-2012) and a post-crisis period (2013-2016). The research is conducted using the Beneish Model, due to its capability to identify, although on the basis of likelihood, companies that potentially adopt earnings management. The results of this study suggest an overall low presence of companies at risk of manipulation throughout the period under investigation; however, the most consistent number of such companies is recorded during the pre-crisis period.

The Social Impact of the Financial Crises in the Recent Past and Evidence Thereof — With Special Reference to India

2017 ◽  
Vol 6 (2) ◽  
pp. 1-12
Author(s):  
Asim Kumar Karmakar ◽  
Sebak Kumar Jana
Keyword(s):  
Financial Crisis ◽  
Financial Crises ◽  
Social Impact ◽  
Global Financial Crisis ◽  
Labour Force ◽  
Social Indicators ◽  
Well Being ◽  
Significant Loss ◽  
Special Focus ◽  
Crisis Period

Financial crises have significant short-term and long-term social costs. As a result, economic and social indicators have dwindled significantly since 2007. The soar in the unemployment rate has been most marked in so called advanced economies, reaching alarming levels in the tangential Europe with more than half of the young labour force unemployed in Greece and Spain. What is more, the crises, one global and another Euro zone financial crisis, have inexplicably hurt the poor. The progress in poverty alleviation has been not smooth across regions, and the pace has slowed since 2007 across the board. The crisis has also created challenges to the achievement of other development targets, including reduction of the occurrence of malnutrition and mortality rates, and civilizing gender equality in education and access to hygienic water and sanitation. This also suggests a significant loss or a reversal of the progress in development. In the above background, this paper presents evidence on the extent to which the global financial crisis and other crises since 2007 has been associated with deteriorating economic and social well-being indicators with a special focus on India. The results clearly indicate that poverty levels have been falling before the pre-crisis period but the post-crisis period witnessed a jump in the poverty rates across India.

Strategic and Innovative Actions of the Government During the Financial Crisis

2019 ◽  
pp. 352-370 ◽  
Author(s):  
Seçil Şenel
Keyword(s):  
Financial Crisis ◽  
Economic Crisis ◽  
Financial Crises ◽  
Social Problems ◽  
Government Intervention ◽  
Crisis Period ◽  
Mortgage Crisis ◽  
Economic Depression ◽  
The Government

Financial crises cause significant economic and social problems for the countries. Many companies stop their operations and a lot of people lose their jobs. Especially after the globalization, there is an increase in the number of financial crises. Because of this aspect, governments try to implement necessary actions to prevent the crisis. In this scope, government intervention to the market during the crisis period is a much-debated concept. The aim of this chapter is to identify the success of government intervention in the market in crisis period. For this purpose, three different financial crises are analyzed, which are 1929 Economic Depression, 2001 Turkish Economic Crisis, and 2008 Global Mortgage Crisis. As a result, it is identified that when government intervene into the market in crisis period, the countries can much easily overcome the crisis. Therefore, it is recommended that strategic and innovative actions should be taken by the government in case of economic crisis, such as increasing liquidity level and implementing new regulations.

Industry and Financial Crises in Fragile and Zombie Firms: Does Leverage Matter?

2018 ◽  
Vol 3 (3) ◽  
pp. 51-58
Author(s):  
Santi Novita ◽  
Bambang Tjahjadi ◽  
Andry Irwanto
Keyword(s):  
Financial Crisis ◽  
Financial Crises ◽  
Jel Classification ◽  
Significant Implication ◽  
Financial Firms ◽  
Financial Soundness

Objective - This paper shows how leverage affects firm's fragility and financial soundness during financial and industry crises. Methodology/Technique - Long term inefficient and zombie firms are explored through the effects of leverage in additional tests. Findings - There are two main results obtained from the sample of Indonesian non-financial firms from 2007 to 2016. First, leverage has a statistically significant correlation with firm's fragility. Second, leverage has an effect on firm's financial soundness during industry crisis. Novelty - Unlike the previous paper, this paper demonstrates a significant implication on the need to differentiate fragile firms and firms that are persistently inefficient, such as zombie firms. Type of Paper: Empirical. Keywords: Fragility; Zombie; Financial Soundness; Leverage; Industry Crisis; Financial Crisis. JEL Classification: M20, M41.

Financial Crisis Fatigue? Politics behind Japan's Post-Global Financial Crisis Economic Contraction

2013 ◽  
Vol 14 (2) ◽  
pp. 223-242 ◽  
Author(s):  
SAORI N. KATADA
Keyword(s):  
Financial Crisis ◽  
Financial Crises ◽  
Japanese Society ◽  
Global Financial Crisis ◽  
Oecd Countries ◽  
Japanese Government ◽  
Japanese Economy ◽  
Institutional Constraints ◽  
Political Response ◽  
The Global Financial Crisis

AbstractDespite a relatively healthy financial sector, the Japanese economy contracted 6.3% in 2009 during the global financial crisis (GFC) after the Lehman shock, the starkest drop among the OECD countries. Since then, the Japanese economy has been slow to recover, although the Japanese government has implemented multiple economic stimulus packages with a high aggregate value.By tracing the Japanese government's response to the GFC in the critical months of October 2008 through the end of 2009, this study argues that the Japanese government failed to manage the crisis decisively due to institutional constraints derived, ironically, from the experiences that Japan gained from a series of financial crises in the 1990s and 2000s. Financial crisis fatigue constrained the supply of Japan's fiscal and monetary measures against the GFC and slowed political response. Furthermore, it made Japanese society unresponsive to these measures.

scholarly journals Financial Crises in State Owned and Private Commercial Banks in Bangladesh: A Comparative Analysis

2019 ◽  
Vol 9 (2) ◽  
pp. 146
Author(s):  
Kawsar Jahan ◽  
Mohammod Akbar Kabir ◽  
Farjana Nur Saima ◽  
Md. Nasim Adnan
Keyword(s):  
Financial Crisis ◽  
Financial Crises ◽  
Commercial Banks ◽  
Banking Sector ◽  
Stock Exchange ◽  
Least Square ◽  
Z Score ◽  
Ordinary Least Square ◽  
History Of ◽  
Score Model

Recently the performance of banking industry is one of the much talked issues in the history of Bangladesh. Predicting the factors of financial crises in banks is very much important as this sector is facing a crises moment now. This study examined the driving factors of financial crises in banking sector using panel data consisted of five year observations (2012-2016) for each of 28 PCBs listed in Dhaka Stock Exchange (DSE) and 6 State-Owned Commercial Banks (SCBs). Financial crisis is measured by Altman’s Z-score and Pooled Ordinary Least Square (Pooled OLS) has been applied to find out the factors necessary to condense financial crisis in banks.The study found that SCBs and listed PCBs in Bangladesh are facing financial crisis on the basis of Altman’s Z-score model. Results of the analysis postulated that CRAR, NIIR and NINTR significantly contribute to lessen financial crisis in listed PCBs and also in SCBs. Therefore, the study suggests the regulatory authorities, including stakeholders and researchers to taking into account the findings of the study and to be more alert of the operations of SCBs and PCBs in order to steps forward the performance of this sector as well development of the country in the coming future.

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