Credit Crisis Research Articles

Accounting documentation of the bankruptcy of Emperor Matthias of Habsburg in 1615: archival sources and research possibilities

ABSTRACT Based on archival research, this study presents a hypothesis that significantly changes the interpretation of the causes of the economic and political conflict in Bohemia in 1618. The results demonstrate that the deciding impulse was the uncontrollable indebtedness of the monarchy which resulted in a sovereign default (1615). The Bohemian Diet refused to guarantee the government bonds which resulted in their loss of value. Between 1615 and 1618, along with the fight for preservation of religious freedom, a strenuous fight for fiscal reform and control of economic resources was in motion. The creditors – European politicians, bankers and generals – wanted the monarch to take over Bohemia with force in order to be able to pay off the outstanding debts. The data regarding the monarchical credit crisis in Bohemia between 1615 and 1618 have not been analysed scientifically up to this point. In this study, the author presents the main documentary sources available on this issue to encourage further research and highlight the value of interdisciplinary dialogue.

House prices and credit as transmission channels from monetary policy to inequality: Evidence from OECD countries

Using a panel vector autoregressive model, this paper assesses the impact of monetary policy on the Gini coefficient of disposable income for 30 OECD countries between 1995Q1 and 2019Q4. We assume house prices and household credit as transmission channels, representing households’ financial balance. To capture the effect of the financial crisis, the analysis further distinguishes the period that started in 2008Q4. We find that a contractionary monetary policy increases the Gini coefficient in a moderate way. For the entire period, house prices are an effective transmission channel, a positive shock decreasing inequality, while credit is not statistically significant. Following the crisis credit stands out as the transmission mechanism, a positive credit shock reducing the Gini coefficient, while house prices lose relevance. These results are robust to different model specifications.

Faktor Yang Menyebabkan Kredit Macet Pada Debitur Di Bank Bri Unit Pasar Baru Balikpapan

Indonesian population growth has influenced the growth of the economy. Banks are needed to support economic activity. To boost economic growth, the banking sector plays an important role in the economy in raising funds and re-routing them. The purpose of the research is to find the credit factor blocked by the bank in the distribution of funds carried out. Analysed using qualitative descriptive methods, the factors causing credit crashes are so diverse and include complex internal and external factors that require good risk management, careful assessment of debtors, as well as an in-depth understanding of the economic and legal conditions applicable in reducing the risk of credit crises.

Faktor yang Menyebabkan Kredit Macet pada Debitur di Bank BRI Unit Pasar Baru Balikpapan

Indonesian population growth has influenced the growth of the economy. Banks are needed to support economic activity. To boost economic growth, the banking sector plays an important role in the economy in raising funds and re-routing them. The purpose of the research is to find the credit factor blocked by the bank in the distribution of funds carried out. Analysed using qualitative descriptive methods, the factors causing credit crashes are so diverse and include complex internal and external factors that require good risk management, careful assessment of debtors, as well as an in-depth understanding of the economic and legal conditions applicable in reducing the risk of credit crises.

Financial innovation intra Muslim capital markets and inter global counterparts: implications of differences

Purpose This study aims to investigate the implications for financial innovation and product development of differences between schools of jurisprudence (fiqh) pertaining across regional Muslim markets, and the consequences for global financial institutions. Design/methodology/approach The methodology is qualitative, drawing upon several sources. Firstly, differences in interpretation regarding the economic and moral responsibilities of financial institutions in Islamic and secular contexts. Secondly, contrasting tenets of schools of Islamic jurisprudence regarding the permissibility of products traded intra Muslim markets. Thirdly, characteristics of complex financial instruments traded in global secular markets prior to the credit crisis of 2007–2008. Findings Differences between Islamic and global secular interpretations regarding responsibilities of financial institutions militate against integrated markets across which products can be seamlessly traded. Global financial institutions should recognise that different Islamic schools of jurisprudence prioritise either legal form or substance of financial products, but not both simultaneously. This should be considered when designing new products for regional Muslim markets. Practical implications Global financial institutions which focus upon the legal (micro) form of new Islamic products should relate in investor prospectuses and marketing materials the extent to which these accommodate Islamic jurisprudence’s equal (macro) concern for public interest or maslahah. This may comprise the reallocation of risk from those unable to bear it to those willing to assume it for a price, reinforcing rather than compromising economic stability. Originality/value This study evaluates implications for product development and marketing for global financial institutions active in regional Muslim markets across which different Islamic schools of jurisprudence apply.

MSCI全球指数与韩国股指波动对韩国贸易的影响

This study aims to analyse the impact of the stock market on Korea’s import and export trade, mainly through the MSCI Global and KOSPI indices as stock market proxies, and Korea’s total imports, total exports, import price indices, economic sentiment indices, and business surveys indices as proxies for import and export trade. Using a time-varying vector autoregression (TVP-VAR) model, it was found that the MSCI Global and KOSPI indices have a short-term positive effect on Korea’s total imports and total exports, but the KOSPI has a negative effect on total exports. For price indices, the MSCI Global Index has a positive effect on the import price index, while the KOSPI has a negative effect at a 1-month lag. For the export price index, the MSCI Global Index has a negative impact at 1-month lag but a positive impact at 3-month lag. For the Economic Sentiment Index, both indices have a negative impact at the 1-month lag. For the business survey index, both have a positive impact. In addition, the study analyses data from three different points in time: the US subprime crisis in 2008, the European credit crisis in 2015 and the New Crown epidemic in 2020. The results show that in all three financial events, the MSCI Global Index had a positive impact on Korea’s total exports and imports in the short term, while the KOSPI had a positive impact on total imports and a negative impact on total exports. For the import price index, the MSCI Global Index has a short-term positive impact while the KOSPI has a negative impact. For the export price index, both indices have a negative impact during financial events. For the economic sentiment index, the MSCI Global Index has a negative impact in the first lag and turns to a positive impact in the second lag, while the opposite is true for the KOSPI. Finally, in all three financial events, both indices had a short-term positive impact on the business survey index.

Anglo–Dutch financial connections and contrasts in the late eighteenth century: The Amsterdam phase of the 1772–3 credit crisis

AbstractWe examine the Amsterdam phase of the 1772–3 financial crisis using the British experience in the same episode as comparative context. We conclude that, notwithstanding some direct exposures by Amsterdam institutions to the principals of the London crisis, the main linkage between the two outbreaks was the requirement for cash margin on loans backed by British East India Company shares. No significant contagion via the bills of exchange network spread from London to Amsterdam in the period separating the two outbreaks, but some feeding back of distress to London is noticeable after the Dutch outbreak. The crisis was rooted in credit expansion, a deterioration in asset risk profiles, and speculation in West Indian mortgage securities and British equity markets. Speculators were enabled by information inefficiencies in the specialized and layered Amsterdam markets, and by the absence of a gatekeeper who could have regulated the provision of credit to them. To contain the outbreak, the Dutch drew on the cohesion of an informal club of insiders who led business and civic affairs. Though the credit markets resumed normal operations relatively quickly, the incurred losses were transformative for their long term prospects by devastating some of their most important firms.

How does competition influence liquidity creation? Exploring credit risk, foreign banks, and crisis

Contributing to the past literature related on how bank competition affects the creation of liquidity, this research explores a comprehensive dataset of 43 European countries for a total of 13,487 individual banks spanning the period 2005–2020. We evaluate the influences of credit risk, foreign banks, and crisis in the liquidity creation and competition nexus, presenting results that greater competition lowers fragile banks’ incentives and/or risk absorption capacity and increases unprofitable liquidity creation, thus supporting the fragility channel hypothesis. Nevertheless, there is an opposite competition causality for commercial banks and financial holding companies. Commercials banks as well as holding companies are generally larger in terms of assets than other financial institutions and hence may have more market power and capacity to lend more, supporting the price channel hypothesis. Credit risk, foreign banks, and crisis exhibit concrete roles in the liquidity creation and competition nexus. Lastly, we discuss policy implications.

REFS-A Risk Evaluation Framework on Supply Chain

Large, powerful corporations were formerly solely and exclusively responsible for supplies, manufacturing, and distribution; however, the supply chain has undergone significant transformations over the last half-century. Almost all supply chain processes are currently outsourced, owing to the initiatives of cutting-edge, contemporary businesses. According to a compilation of studies, analysts, and news sources, the level of risk associated with modern supply chains is considerably higher than the majority of supply chain managers believe. Supply chain vulnerabilities continue to pose a substantial obstacle for a great number of organizations. Neglecting to adequately address these risks—encompassing natural disasters, cyber assaults, acts of terrorism, the credit crisis, pandemic scenarios, and war—could result in substantial reductions in metrics such as profitability, productivity, revenue, and competitive advantage. Unresolved concerns persist with respect to the risk assessment of the supply chain. The purpose of this article is to propose a framework for risk evaluation that can be efficiently applied to the evaluation of hazards within the supply chain. This research study significantly enhances the existing knowledge base by offering supply chain managers a pragmatic tool to evaluate their processes, regardless of the mathematical foundations or the variety of variables utilized in risk assessment. The outcomes of multiple aggregation methods are compared using a case study from an automotive EMS production; the conclusions are validated by risk and FMEA specialists from the same factory.

Loopholes in the Indian Banking System concerning Non-Performing Assets (NPAs) – A Case Study of “Axis Bank and HDFC Bank”

Abstract -The paper presents a comparative case analysis of two leading banks, Axis Bank and HDFC Bank. The rising tide of Non-Performing Assets (NPAs) in the banking sector is a major threat to financial stability and economic progress. The case study uncovered severe deficiencies in risk management, credit evaluation, and regulatory compliance, which have resulted in a considerable accumulation of Non-Performing Assets. The banks' exposure to economically sensitive sectors amplifies the impact of downturns on asset quality. The limitations in credit risk assessment underline the necessity for increased due diligence. Regulatory frameworks, such as the Insolvency and Bankruptcy Code, and prompt corrective action have a significant impact on NPA responses. The findings highlight the complicated interplay between internal banking practices, regulatory frameworks, and economic conditions that affect a bank's financial performance. Addressing discovered weaknesses inside both these banks is important to the stability of India's financial system. The implications, as indicated by rising NPAs, are felt throughout the sector, jeopardizing overall resilience. Addressing these problems is crucial for reducing systemic risks, preventing a credit crisis, and rebuilding trust in the financial industry. A better banking system is critical for India's financial stability, economic growth, and stakeholder trust. As major private sector players, Axis Bank and HDFC Bank’s successful remediation set a precedent, emphasizing the need for excellent risk management, regulatory compliance, and strategic adaptation. Key Words: Axis Bank, HDFC Bank, Non-Performing Assets, Risk Management, Regulatory Compliance, Financial Stability, Economic Impact

Political connection and credit risk of real estate enterprises: evidence from stock market

Although extensive research has examined the credit risk of real estate enterprises, the relationship between the political connection of real estate enterprises and these enterprises’ credit risk has not been formally studied. Using the panel data of 123 real estate listed companies in the Chinese stock market from 2008 to 2021, this paper finds a significant positive correlation between the political connection of private real estate listed companies and their credit risk. This phenomenon is attributed to the excessive debt that benefits from political connections since it may raise the credit risk of any real estate firm. Interestingly, considering that 2013 is the first year of China’s Internet finance era, we find that the popularity of Internet finance and other decentralized lending financing channels may enhance the impact of political connections on real estate credit risk. Our findings provide new micro evidence for the influencing factors and mechanism of credit risk of real estate enterprises during the recent “credit crisis” in the real estate market in China.

Proposing an innovative real-time monitoring approach for the parameter stability of credit-default prediction model

In real-world applications, the default prediction process generally requires periodic recalibration of parameter estimates with up-to-date data. However, few studies have investigated sudden changes or unknown structural breaks in the regularly estimated parameters, which could lead to biases in the models and thus affect the prediction accuracy. The instability of estimated parameters has been shown to under- or overestimate prediction results, but their real-time monitoring remains unexplored. This paper aims to fill this research gap by monitoring the estimated parameter stability in default prediction models in real time using statistical process control methods. We innovatively transform this issue into a research problem of profile monitoring and examine the monitoring performance of three control charts using Monte Carlo simulation. Simulation experiments demonstrate that the self-starting multivariate exponentially weighted moving average control chart outperforms other charts in detecting speed and range. It can also predict credit crises, detect more minor changes in risk, and describe their changing trends in real time. Throughout this article, we employ a forward intensity approach, which has been put into long-term applications for corporate default predictions, to illustrate the profile monitoring process.

Firms’ Precautionary Savings and Employment during a Credit Crisis

Can the macroeconomic effects of credit supply shocks be large even when a small share of firms is credit constrained? I use UK firm-level accounting data to discipline a heterogeneous-firm model where the interaction between real and financial frictions induces precautionary cash holdings. In the data, firms increased their cash ratios during the Great Recession, and cash-intensive firms displayed higher employment growth. A tightening of firms’ credit conditions generates the same dynamics in the model. Unconstrained firms preemptively respond to credit supply shocks; this precautionary channel, when appropriately quantified, crucially matters for the aggregate dynamics and firm-level patterns. (JEL D22, E24, E32, E44, G32)

An Analysis of the Causes of Evergrande Debt Crisis

Since August 2020, new regulations on real estate financing have been issued, emphasizing “the need to improve the marketization, standardization, and transparency of financing”. Subsequently, the capital liquidity crisis caused by Evergrande’s high debt and high turnover mode has become the focus of public attention in the market and has triggered the credit crisis of the real estate industry to a certain extent. This study is based on the public information such as the financial statements. To analyze and study the causes of the crisis, this paper will analyze the causes of the Evergrande Group crisis by comparing the previous financial statements of the company, using the balance sheet and comparing the profitability, and putting forward suggestions on the future liquidity and long-term development of Evergrande Group. The suggestions give inspiration to the same industry or enterprises in the same model. Warning the existing housing enterprises, Evergrande Group serves as the most negative example in textbooks, playing a warning role to prevent such a serious crisis from happening again.

The role of consumer reviews in e-commerce platform credit supervision: A signaling game model based on complex network

Although fraudulent operations on e-commerce platforms have been repeatedly mentioned, neither its causes nor the complexity among merchants has been systematically established in the literature. Combined with a merchant complex network and game theory, we propose a signaling game model. The model highlights that the pooling equilibrium is why merchants transmit false signals. Imposing the penalty on dishonest merchants can shift to the separation equilibrium, an effective way to resolve the credit crisis. Meanwhile, we utilize consumer reviews to adjust the stability of the separation equilibrium and demonstrate the validity by numerical simulations. The results show that the enthusiasm and authenticity of reviews were complementary to penalty strategies. The moderate enthusiasm and influence of reviews, and high authenticity, are more conducive to the long-term development of the e-commerce platform. The findings of this study provide insight into platform credit supervision from the perspective of consumer reviews.

Challenges of University Science and Technology Ethics Education in the New Era of Artificial Intelligence

New artificial intelligence has emerged strongly with an unstoppable trend. The emergence of ChatGPT has brought new impacts and challenges to education and ethics. The importance of science and technology ethics education is unprecedentedly prominent in such an era. Science and technology ethics should be an important basic quality necessary for young people in the new era of science and technology. As the main front for personnel training and scientific research, universities shoulder the important mission of finding the direction of scientific research and implementing the main responsibility of science and technology ethics management. Starting from the characteristics of ChatGPT generative artificial intelligence itself, This study aims to analyze the threat of artificial intelligence to higher education academic ethics (including the academic dishonesty and inertia of thoughts), privacy security and credit crisis, false information fabrication, algorithmic bias and discrimination in artificial intelligence by studying the current situation of science and technology ethics education in colleges and universities. Based on the analyses, the study explores new directions and paths for the future development of universities science and technology ethics education.

Black swan events and stock market behavior in Gulf countries: a comparative analysis of financial crisis (2008) and COVID-19 pandemic

PurposeThe current study aims to examine the impact of two black swan events on the performance of six stock markets in Gulf Cooperation Council (GCC) economies (Abu Dhabi, Bahrain, Dubai, Oman, Qatar and Saudi Arabia). The two selected black swan events are the US Mortgage and credit crisis (Global Financial Crisis of 2008) and the COVID-19 pandemic.Design/methodology/approachThe performance of all the six stock markets are represented by their return and price volatility behavior, which has been measured by applying ARCH/GARCH model. The comparative analysis is done by employing mean difference models. The data is collected from Bloomberg on a daily frequency.FindingsThe response of two black swan events on the GCC stock markets has been heterogenous in nature. During the financial crisis, the impact was heavily felt on most of the stock markets in the GCC countries. It is revealed that the financial crisis had a negative significant impact on four of the six countries. Whereas during the COVID-19 crisis, it is revealed that there is no significant impact on four of the six selected stock markets. The positive significant impact is felt on two stock markets, namely, the Abu Dhabi stock market and the Saudi stock market.Originality/valueThe present investigation attempts to fill the gap in the literature on the intended topic because it is evident from the literature on the chosen subject that no study has been undertaken to evaluate and contrast the impact of the GFC crisis and COVID-19 on the GCC stock markets.

The Macroeconomic Implications of Subprime Crisis

Finance is partly international since financial assets have such high liquidity. Many factors, including national financial institutions, financial markets, financial products, and others, contributed to the financial crisis. People's expectations for the future of the economy are pessimistic, the currency of the region has produced a sizeable budget, the scale and aggregate of the economy have been significantly reduced, domestic economic growth has been severely harmed, and many businesses have closed, driving up the unemployment rate. Moreover, there is some social unrest and political unrest along with a general decline in the social economy. On August 9, 2007, the global financial crisis, also known as the credit crisis and lasting from 2007 to 2009, began. After the early subprime home credit crisis arose, investors began to lose trust in the value of mortgage instruments, which caused a liquidity crisis. Despite continuously pumping large amounts of money into the financial system, the central banks of multiple different countries were unable to halt the financial crisis from beginning. The financial crisis had been under control up until September 9, 2008, but it had begun to spin out of control, leading to the failure of numerous significant financial institutions or government takeover.

2008 Financial Crisis: Cause, Consequence & Response

The US real estate bubble's deflation marked the beginning of the financial crisis in 2008. On September 15, 2008, the investment bank Lehman Brothers went bankrupt, sparking a widespread global banking crisis. With several financial institutions failing and financial assets sharply declining, the crisis swiftly extended to the whole financial system. The US financial crisis quickly turned into a global economic disaster that affected Europe and the rest of the globe. The global financial crisis was directly brought on by the American subprime crisis. Beneath the credit crisis, the US financial crisis was brought on by a buildup of long-term excessive spending, an abundance of loans without an economic foundation, exorbitant salaries paid to bank white-collar staff, a severe shortage of developing businesses, an imbalance in fintech, the absence of financial regulation, and other ingrained causes. By analyzing the causes of the financial crisis, people can prepare for a rainy day. However, the investors should not be too optimistic. It also realizes that there are still a lot of unfinished business. Investors need to seize the favorable opportunity, in the favorable time is easier to solve these problems.

Trade credit, creditor protection and banking crisis

This paper analyzes the effect of banking crises on the trade credit provided to customers and whether this effect depends on the strength of a country's legal protection of creditors. The results indicate that trade credit extensions increase in times of crisis, although this increase is smaller in countries where creditors are well protected; however, no differences are observed in trade credit extensions between countries with weak and strong creditor protection in non-crisis periods.