The Financial Crisis on Trial: What Went Wrong

Americans demanded retribution from the mortgage lenders whose subprime loans defaulted and from investment bankers whose mortgage-backed securities sharply declined in value in 2007, leading to financial panic and the Great Recession. From 2008 to 2019, the federal government extracted hundreds of billions in fines from dozens of corporations, but few individual business executives were held accountable, and no senior banker was convicted of a crime. I use the trial court record of five government enforcement cases against individuals to explain this apparently anomalous result. I conclude that, in addition to a lack of funding, the prosecution effort was hindered by the government’s erroneous selection of cases to pursue. Further, the diffused nature of decision making in the mortgage finance market made it difficult to prove that any one senior-level participant had the criminal intent necessary for a conviction or a Securities and Exchange Commission civil fine or injunction. The trial results also support the argument that the growth and consolidation of investment banks from 1990 to 2008 created incentives for misconduct within the firms.

Blockchain: an EOM approach to reconciliation in banking

PurposeThe study aim is to evaluate the contribution of Blockchain technology (Cryptobanking) using expected operating model (EOM) to address the pain points in reconciliation at middle and back-office operational levels in assessing the significance of this technology on return on investment.Design/methodology/approachA structured questionnaire was designed to collect primary data using a stratified sampling method from 120 respondents working in leading Investment banks operating in the geographical locality of urban Bangalore. Demographic variables, accounting variables, data reporting variables, approach variables, variables of EOM were considered to validate the hypothesis with the help of statistical tools, namely ANOVA, and Multiple Stepwise Regression Analysis.FindingsThe results obtained confirm that there is significant difference in reconciliation with implementation of an innovative business process. Financial analysis is the highest predictor of ROI when integrated with technology as the adapted Blockchain innovation in reconciliation is the most influencing factor in enhancing, improving ROI playing a pivotal role in the Investment banks.Originality/valueBlockchain technology (Cryptobanking) facilitates in transforming the reconciliation process of these banks with improved operational efficiency. Blockchain and settlement platforms offer inter-organization solutions facilitating in the reconciliation of various transactions in real-time through a trust-based network in the form of digital settlements with better consortiums.

Performance analysis of healthcare-focused special purpose acquisition companies

The Covid-19 pandemic has accelerated some structural changes in the healthcare industry, and several health-tech start-ups thrived by providing innovative solutions to the challenges imposed by the pandemic. To finance their growth, many of these companies went through mergers with Special Purpose Acquisition Companies (SPACs). The paper investigates the market performance of healthcare-focused US-listed SPACs. The study aims to analyze the returns that healthcare SPACs offer to their investors and ascertain the determinants that drive these returns over a sample of 33 SPACs that merged with a healthcare firm between 2018 and 2021. Linear regression is employed to identify the drivers of SPACs’ market performance. Portfolio analysis is also performed and compared against the Russell 2000 and the S&P500 Healthcare Indexes.The first outcome accomplished by the analysis is that a portfolio made of healthcare-SPACs underperforms small-cap firms by 2.14% and the healthcare industry by 6.72% over a two-year period, even if the difference in the returns of the healthcare SPACs portfolio and the two benchmarks is not statistically significant. Moreover, a high level of redemptions, the presence of serial SPAC sponsors, cross-border deals, private equity and venture capital funds as sellers, and a high percentage of boutique investment banks among the sell-side advisors seem to negatively affect the returns of healthcare-focused SPACs with a significance level of at least 10%. Instead, a larger number of buy-side advisors appears to be beneficial for healthcare-focused SPACs’ market performance.

Relationship Between Selected Macroeconomic Variables and the Financial Performance of Investment Banks in Kenya

Currently, investment banks in Kenya are facing a lot of challenges due to persistence losses. However, the available studies are inadequate to aid investment banks in overcoming these challenges in Kenya due to mixed findings, resulting in rising uncertainty on equity investments’ performance, leading to massive losses among investment banks.  This study, therefore, sought to model the relationship between inflation, GDP, interest rates, exchange rates, and financial performance of investment banks. Arbitrage pricing theory, Modern portfolio theory as well as classical economic theory (flow-oriented model) was used. A causal research design was adopted. The study found that inflation has negative significant influence on financial performance of equity investments among investment banks in Kenya. Also, GDP has positive and significant influence on financial performance of equity investments among investment banks in Kenya. Interest rate was also found to have negative and significant influence on financial performance of equity investments among investment banks in Kenya. In addition, exchange rate has negative significant influence on financial performance of equity investments among investment banks in Kenya. The study therefore recommends any investor including financial investors to methodically analyze inflation trends and understand how it affects the company’s financial performance. Investors must also be in a position to predict the future concerning inflation changes.

Relationship Between Selected Macroeconomic Variables and the Financial Performance of Investment Banks in Kenya

Currently, investment banks in Kenya are facing a lot of challenges due to persistence losses. However, the available studies are inadequate to aid investment banks in overcoming these challenges in Kenya due to mixed findings, resulting in rising uncertainty on equity investments’ performance, leading to massive losses among investment banks.  This study, therefore, sought to model the relationship between inflation, GDP, interest rates, exchange rates, and financial performance of investment banks. Arbitrage pricing theory, Modern portfolio theory as well as classical economic theory (flow-oriented model) was used. A causal research design was adopted. The study found that inflation has negative significant influence on financial performance of equity investments among investment banks in Kenya. Also, GDP has positive and significant influence on financial performance of equity investments among investment banks in Kenya. Interest rate was also found to have negative and significant influence on financial performance of equity investments among investment banks in Kenya. In addition, exchange rate has negative significant influence on financial performance of equity investments among investment banks in Kenya. The study therefore recommends any investor including financial investors to methodically analyze inflation trends and understand how it affects the company’s financial performance. Investors must also be in a position to predict the future concerning inflation changes.

What is hiding behind the money accumulating in Utah?

Taking up the geographer's task of following and defetishizing the commodity, this research taps into the United States (US) federal banking data to locate the commodity “money”. Law is used to specify money's locations. Relative to the size of its economy, Utah's banks report a lopsided share of US money. This paper unmasks important social relations embedded in the money commodities located in Utah's banks by tracing the history of US banking law, which has played a leading role in the processes responsible for Utah's outsized share of the sub-national monetary landscape. Banking law determined the scope and type of business in which banking firms and their corporate affiliates could engage. Throughout the 20th century, investment banks and commercial firms struggled to claim legal rights to engage in business combinations once deemed illegal: combining non-banking business with a commercial bank. The state of Utah, in coordination with financial and commercial firms, has expanded the legal and financial space of Industrial Loan Banks (ILBs), historically idiosyncratic chartered banks exempt from regulations separating banking firms from non-banking business. Utah marketed their banking charters to global, systemically important financial institutions and large commercial conglomerates, which then established or acquired ILB subsidiaries within the state. From Utah, the die had been cast: the largest non-banking firms on the planet were now legally empowered to accumulate capital in ways that had heretofore been forbidden at other locations. American banking had been transformed.

Corporate Financial Risk Management Interventions in the Organic Agri-Food Chains

This study arises from the need to propose an alternative solution to existing hedging methods to all companies interested in hedging the price risk of raw materials. The research focuses mainly on the actors of the agri-food supply chains, in particular the organic sector, given the growing trend of the cultivation methodology and the need to protect entrepreneurs involved in short-chain spinneret who have less possibility of relieve higher costs incurred to ensure the sustainability of the product. However, our analysis envisages a customizable hedging method for any company that intends to protect itself from the price fluctuations of the commodity that represents the inherent nature of its business. The technique consists in the construction of specific contracts (in particular, derivative financial instruments) by investment banks or commercial banks oriented to the corporate segment that offer this service. Personalization is achieved by calibrating the constituent elements of the derivative on the basis of hedging needs. The parameterization is carried out by replicating the contractual specifications of the main futures on commodities listed on regulated markets. This will allow the creation of a combination of option contracts listed on the over-the-counter market in an overall strategy aimed at medium-long term hedging.

Innovative Banking Practices and Financial Performance of Commercial Banks in Kenya

Commercial banks serve as key financial intermediaries in facilitation of the flow of money in the banking industry. Commercial banks offer credit to investment banks in order to offer investment opportunities for risky investments especially for financial securities using depositors’ money. Globally, banks are affected by broad difficulties in the operating environment. The banking industry has embraced innovation to sustain competitiveness. Financial innovations used by commercial banks revolve around the latest product, service and its conveyance to consumers. Consequently, this information influenced the research with its aim as; investigating innovative banking applications and monetary capability of banks. Particular goals included examining how; real time gross settlements (RTGS), electronic fund transfers (EFT), pay bill innovation in mobile banking and the extent of agency banking influence monetary potential of banks. Research anchored on the Schumpeter theory of innovations, the agency and bank-led theories. It was explanatory in nature and applied a census approach to gather information. The targeted group included commercial banks registered under the Central Bank totalling to 42 tiers 1. Raw and derived data was equally utilized including, financial statements and face to face interviews with top level managers. Collected information was examined by SPSS. Given conclusions were dispensed descriptively, and by inferring to statistical presentations. The resulting conclusion was that; when RTGS, agency banking, EFT, and mobile banking are solely brought up/down by a single unit, financial performance increased/ decreased by 0.163, 0.27, 0.197, and 0.318 units. At a constant however, financial performance remained at 0.236 out of 5 units. In conclusion, commercial in banks have significantly relied on innovative banking practices to shift their financial performance to new heights. The study has particularly placed both mobile and agency banking at a more central position in driving financial performance to the desired level than other factors including the RTGS and EFT. As part of the recommendations, managements of commercial banks should consider scaling up their adoption of RTGS, agency banking, EFT, and mobile banking as ways of reducing the operating cost of their respective banks reducing banking hall congestions since most of the frequently sought banking services can be achieved without one on one meeting with the bank tellers. Management should also consider adopting more innovative banking practices besides those this research investigated.