scholarly journals Capital, Contagion, And Financial Crises

2020 ◽  
Vol 2020 (2) ◽  
Author(s):  
Nicholas K. Tabor ◽  
Jeffery Y. Zhang
Keyword(s):  
Financial Crisis ◽  
Capital Requirements ◽  
Powerful Predictor ◽  
Academic Literature ◽  
Ex Post ◽  
Lehman Brothers ◽  
Highly Correlated ◽  
Market Valuations ◽  
Financial Regulatory ◽  
Do So

After the 2008-09 financial crisis, policymakers around the world focused on enacting improvements that would make the emergence of a financial crisis less likely (ex ante) and recovery from one more rapid (ex post). This Article identifies a gap in both the academic literature and the current financial regulatory framework in exploring how to limit the damage—to other firms, and to the financial system—when a crisis is ongoing. Policymakers cannot predict the origins of every future crisis, just as firefighters cannot predict the origins of every future fire. Once one begins, how can they keep the damage from spreading? The academic theory on financial crisis “firefighting” divides into two main camps. The “capital view” claims that runs on financial institutions are fundamentally rational, and that investors care mainly about solvency. Under this view, the best way to fight runs is to raise capital requirements ahead of time, to multiples of current levels. The “contagion view” claims instead that the lack of liquid assets both defines and causes bank runs; an institution’s access to cash (and instruments like it) determines whether and when investors will withdraw funding. Under this view, the best way to fight runs is for governments to lend banks money—freely, at high rates, and against good collateral—and to promise to do so well before a crisis starts. In this Article—the first to directly address this question empirically—we show that neither view fits the most catastrophic financial shock of the last ninety years: the 2008 Lehman Brothers bankruptcy. In some cases, banks with more capital and liquidity were actually more exposed, not less, to the market panic following Lehman’s collapse. By contrast, we show that simple market correlation was a powerful predictor of exposure to the Lehman run. We also show that market valuations of large banks are more highly correlated today than they were in September 2008, creating a potential unaddressed conduit for an unexpected shock to metastasize into a contagious run.

A Decade after Lehman: An Assessment of Key Regulatory Responses to the Global Financial Crisis

2019 ◽  
Vol 16 (4) ◽  
pp. 457-483
Author(s):  
Andreas Kerkemeyer
Keyword(s):  
Financial Crisis ◽  
Global Financial Crisis ◽  
Financial System ◽  
Capital Requirements ◽  
Investment Bank ◽  
Over The Counter ◽  
Basel Accords ◽  
Lehman Brothers ◽  
The Global Financial Crisis ◽  
Almost All

In September, 2008, the meltdown of the investment bank Lehman Brothers accelerated the Global Financial Crisis, which affected economies and consumers worldwide. As soon as the Global Financial Crisis broke out, governments and legislators recognized the need for macroprudential reform in order to build a resilient financial system. Today, legislators in every major jurisdiction have finalized almost all major reforms that were envisaged once it had become clear that the crisis was also due to regulatory shortcomings. The reforms especially targeted (over-the-counter) derivatives and the equity base of banks. Following an analysis of the reasons for the Global Financial Crisis and the regulatory failures that contributed to its severity this article will discuss two major legislative responses that intend to make the financial system robust – the establishment of a central dearing obligation for over-the-counter derivatives and the revised Basel Accords on capital requirements for banks.

scholarly journals Investment Commonality across Insurance Companies: Fire Sale Risk and Corporate Yield Spreads

2018 ◽  
Vol 54 (6) ◽  
pp. 2543-2574 ◽  
Author(s):  
Vikram Nanda ◽  
Wei Wu ◽  
Xing (Alex) Zhou
Keyword(s):  
Financial Crisis ◽  
Credit Risk ◽  
Explanatory Power ◽  
Capital Requirements ◽  
Insurance Companies ◽  
Investment Strategies ◽  
Yield Spreads ◽  
Bond Yield ◽  
Highly Correlated ◽  
Risk Categories

Insurance companies often follow highly correlated investment strategies. As major investors in corporate bonds, their investment commonalities subject investors to fire sale risk when regulatory restrictions prompt widespread divestment of a bond following a rating downgrade. Reflective of fire sale risk, the clustering of insurance companies in a bond has significant explanatory power for yield spreads, controlling for liquidity, credit risk, and other factors. The effect of insurer clustering on bond yield spreads is more evident for bonds held to a greater extent by capital-constrained insurance companies, those with ratings closer to National Association of Insurance Commissioners risk categories with larger capital requirements, and during the financial crisis.

ASPEK ETIK DAN SISTEMIK DALAM EKONOMI DAN BISNIS ISLAM

ALQALAM ◽  
2014 ◽  
Vol 31 (1) ◽  
pp. 187
Author(s):  
Budi Harsanto
Keyword(s):  
Financial Crisis ◽  
Business Ethics ◽  
Moral Hazard ◽  
Global Financial Crisis ◽  
Financial Institution ◽  
Research Question ◽  
Academic Journals ◽  
Lehman Brothers ◽  
The World ◽  
The Global Financial Crisis

The fall of Enron, Lehman Brothers and other major financial institution in the world make researchers conduct various studies about crisis. The research question in this study is, from Islamic economics and business standpoint, why the global financial crisis can happen repeatedly. The purpose is to contribute ideas regarding Islamic viewpoint linked with the global financial crisis. The methodology used is a theoretical-reflective to various article published in academic journals and other intellectual resources with relevant themes. There are lots of analyses on the causes of the crisis. For discussion purposes, the causes divide into two big parts namely ethics and systemic. Ethics contributed to the crisis by greed and moral hazard as a theme that almost always arises in the study of the global financial crisis. Systemic means that the crisis can only be overcome with a major restructuring of the system. Islamic perspective on these two aspect is diametrically different. At ethics side, there is exist direction to obtain blessing in economics and business activities. At systemic side, there is rule of halal and haram and a set of mechanism of economics system such as the concept of ownership that will early prevent the seeds of crisis. Keywords: Islamic economics and business, business ethics, financial crisis 

scholarly journals Can Financial Engineering Cure Cancer?

2013 ◽  
Vol 103 (3) ◽  
pp. 406-411 ◽  
Author(s):  
David E Fagnan ◽  
Jose Maria Fernandez ◽  
Andrew W Lo ◽  
Roger M Stein
Keyword(s):  
Financial Engineering ◽  
Analytical Framework ◽  
Capital Requirements ◽  
Debt Financing ◽  
Investment Projects ◽  
Time Horizons ◽  
Long Time ◽  
Private And Public ◽  
Public Equity ◽  
Highly Correlated

Traditional financing sources such as private and public equity may not be ideal for investment projects with low probabilities of success, long time horizons, and large capital requirements. Nevertheless, such projects, if not too highly correlated, may yield attractive risk-adjusted returns when combined into a single portfolio. Such “megafund” portfolios may be too large to finance through private or public equity alone. But with sufficient diversification and risk analytics, debt financing via securitization may be feasible. Credit enhancements (i.e., derivatives and government guarantees) can also improve megafund economics. We present an analytical framework and illustrative empirical examples involving cancer research.

scholarly journals A capability framework for financial market regulation

2017 ◽  
Author(s):  
Rutger Claassen
Keyword(s):  
Financial Markets ◽  
Market Failure ◽  
Capability Approach ◽  
Martha Nussbaum ◽  
Market Regulation ◽  
Financial Market Regulation ◽  
Academic Literature ◽  
Regulation Of Financial Markets ◽  
Do So ◽  
The Capability Approach

This chapter is about normative justifications for regulating markets. In leading handbooks as well as in the academic literature, a split is often made between economic justifications (based on the theory of market failure) and social justifications (mainly around considerations of paternalism and distributive justice). The chapter questions this dichotomy and calls for the development of an ethically coherent framework for market regulation. To do so, the chapter proposes to build on the capability approach, first developed by economist Amartya Sen and philosopher Martha Nussbaum. A capability approach to regulation would hold that markets should be regulated to the extent necessary for realizing a set of basic capabilities. The chapter discusses existing applications to property law and contract law and extends them into the outlines of a general theory of regulation. The final part illustrates the promises of such an approach with respect to the regulation of financial markets.

scholarly journals Does the intensity of prudential regulation affect banks? Evidence from the 2007-2009 crises.

2012 ◽  
Vol 1 (3) ◽  
pp. 14-26 ◽  
Author(s):  
Isabel Argimon ◽  
Gerard Arqué Castells ◽  
Francesc Rodríguez Tous
Keyword(s):  
Capital Requirements ◽  
Capital Regulation ◽  
Risk Sensitivity ◽  
The European Union ◽  
Regulatory Capital ◽  
European Banks ◽  
Observed Behaviour ◽  
The Right ◽  
Yearly Data ◽  
Do So

The main objective of this research is to gather empirical evidence on the effects of more or less stringency and more or less risk sensitivity in regulatory capital requirements on the observed behaviour of European banks during the initial years of the financial crisis. To do so, we use the indices built in Argimón and Ruiz (2010), which capture such characteristics of capital regulation. We test their incidence using changes in yearly data for individual banks for 25 countries of the European Union covering the period 2007-2009. Our results show that more stringency and risk sensitivity in capital regulation resulted in higher capital increases, with limited effect on risk taking. However, for well capitalized banks, higher risk sensitivity resulted in higher capital and higher risk, thus requiring striking the right balance, so as to lead to increased stability.

scholarly journals ANÁLISE INTER-RELACIONAL DE INDICADORES DE ABSENTEÍSMO E TURNOVER: O CASO DE UMA INDÚSTRIA TÊXTIL DO LITORAL NORTE DE SANTA CATARINA

2018 ◽  
Vol 7 (1) ◽  
pp. 95-110
Author(s):  
Ana Célia Bohn ◽  
Sidnei Gripa ◽  
Nelson Hein ◽  
Adriana Kroenke
Keyword(s):  
Organizational Behavior ◽  
Single Case ◽  
Santa Catarina ◽  
Organizational Research ◽  
Exploratory Approach ◽  
Proposal A ◽  
Highly Correlated ◽  
Behavioral Criteria ◽  
Do So

Os pesquisadores têm analisado separadamente, os indicadores de absenteísmo e turnover como critérios comportamentais em investigação organizacional. Nesse sentido, observa-se pouca atenção dada à sua possível inter-relação. Este estudo tem como objetivo analisar a inter-relacão dos indicadores de absenteísmo e turnover a fim de entender se há relações envolvidas nesses indicadores. O estudo foi baseado no construto de Migliolli e Kroenke (2016), e recebeu enquanto delineamento metodológico uma pesquisa do tipo quantitativa, longitudinal, em caráter de testagem empírica, de abordagem exploratória, com objeto de estudo um caso único, pautados na conveniência de pesquisa. Para tanto, partiu-se do pressuposto de que a integração desses indicadores pode fornecer orientações sobre alguns comportamentos organizacionais. Para consubstanciar a proposta foi construída uma função sinusóide. Os resultados apontam com algumas exceções que o turnover está altamente correlacionado com o absenteísmo, ou seja, o start para o turnover é o alto índice de absenteísmo. Conclui-se que para a empresa diminuir o seu índice de turnover é preciso primeiro implantar ações para a diminuição do índice de absenteísmo.Palavras-Chave: Absenteísmo. Turnover. Inter-relação. Abstract: Researchers have been analyzing separately the absenteeism indicators and turnover as behavioral criteria in organizational research. In this regard, it is observed the lack of attention given to its possible interrelation. This study aims to analyze the absenteeism indicators interrelation and turnover to understand if there are any associations involved in these indicators. The study was based on Migliolli and Kroenke’s (2016) construct, and while it was a methodological design, received a research of quantitative and longitudinal nature, with empirical and testing aspects, exploratory approach, using a single case as the studying subject, based on the research’s convenience. To do so, it was assumed that the integration of these indicators can provide guidance on some organizational behavior. To substantiate the proposal, a sinusoid function was made. The results point with a few exceptions that the turnover is highly correlated with absenteeism, that is, the start for turnover is the high absenteeism index. So, it is concluded that for the company to decrease its turnover index it is necessary to first implement actions to reduce the absenteeism index.Keywords: Absenteeism. Turnover. Interrelation.

scholarly journals Human Rights Half Measures: Avoiding Accountability in Postwar Sri Lanka

2019 ◽  
Vol 72 (1) ◽  
pp. 121-163 ◽  
Author(s):  
Kate Cronin-Furman
Keyword(s):  
Human Rights ◽  
The Political ◽  
The West ◽  
Academic Literature ◽  
International Pressure ◽  
Human Rights Council ◽  
The Creation ◽  
Veto Points ◽  
Do So

AbstractWhy do repressive states create human rights institutions that cost them money and political capital but fail to silence international criticism? The academic literature assumes that states engaging in disingenuous human rights behavior are hoping to persuade (or deceive) liberal Western states and international advocates. But if human rights promoters in the West are the target audience for the creation of these half measures institutions, the strategy appears puzzlingly miscalculated. It reveals that the repressive state is sensitive to international opinion, and often results in increased pressure. The author argues that states engaging in human rights half measures are playing to a different, previously overlooked audience: swing states that can act as veto points on multilateral efforts to enforce human rights. The article illustrates these dynamics with a case study of Sri Lanka’s response to international pressure for postwar justice. The author shows that although the creation of a series of weak investigative commissions was prompted by pressure from Western governments and ngos, it was not an attempt to satisfy or hoodwink these actors. Instead, it was part of a coalition-blocking strategy to convince fellow developing states on the UN Human Rights Council to oppose the creation of an international inquiry and to give them the political cover to do so.

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