Impact Of Financial Crisis Research Articles

CORPORATE INVESTMENT IN THE GLOBAL FINANCIAL CRISIS

This paper exams the impact of high levels of bank debt, leverage, credit obtained from government banks and cash reserves in the long and short terms investments of firms in the main Latin American countries after this crisis. For this purpose, it is applied a difference-in-differences test in a sample of more than 500 public and private firms, using hand-collected data of firms’ governmental bank dependence. The review period considers five previous (2003–2007) and subsequent years (2008–2012) to the crisis. The major results are reduction of long-term investments for firms with greater banking dependence, as well as short-term investments for firms with a higher level of cash reserves. Besides, firms that are more reliant on government-owned banks reduce capital expenditures. Differently from other studies, this one examines the impact of the last global financial crisis on the firms´ investment, considering its dependence of bank debt of institutions that belongs to the government or not. Understanding the mechanisms available to emerging economies can shed light on new countercyclical policies of governments and changes in the legislations of the financial system.

The impact of financial crises on the construction industry in Russia

The impact of financial crises on the construction industry in Russia

Policies in Hard Times: Assessing the Impact of Financial Crises on Structural Reforms

AbstractIt is argued that crises open up a window of opportunity to implement policies that otherwise would not have the necessary political backing. We show that not only is the crises–reforms nexus unfounded in the data, but rather crises are associated with a reversal of liberalisation interventions depending on the institutional environment. We find that, in democratic countries, crises occurrences have no significant impact on liberalisation measures. On the contrary, after a crisis, autocracies reduce liberalisation in multiple economic sectors, which we interpret as the fear of regime change leading non-democratic rulers to please vested economic interests.

Measuring the impact of financial cycles on family firms: how to prepare for crisis?

Financial cycles have sizeable economic effects, as witnessed during the 2008 financial crisis. However, despite the topic’s research importance, there is limited literature on how financial cycles and financial crises affect individual family firms. To the best of our knowledge, our study is among the first to measure the impact of financial cycles and crises on family firms. To study the impact of financial cycles on family firms, we use the Amadeus database on European companies. We identify family firms following the Global Family Business Index methodology 2019 (EY and the Center for Family Business of the University of St. Gallen). To measure the impact of financial cycles, we use the credit-to-GDP gap indicator from the Bank for International Settlements. Using the credit-to-GDP gap as a proxy for financial cycles, we use panel structural vector autoregression (Abrigo and Love 2016), Wald tests of Granger causality (Granger 1969), and impulse response functions (Lütkepohl 2010; Lütkepohl et al. 2015). We prove that family firms are less vulnerable than non-family firms to financial cycles during both financial booms and busts. Family firms perform better when financial cycle shocks have a less pronounced impact on firms’ performance. Non-family firms are highly vulnerable to financial cycles, performing worse during both booms and busts. The adoption of family firm management and governance policies should improve non-family firms’ performance and help the economy recover rapidly in times of crisis (exogenous shocks). Our study is the first to explore the impact of financial cycles on the micro level with a focus on family firms. The results could help managers and practitioners better form their business policy by looking at family firms’ experiences. Targeting economic policy more towards family firms in good and bad times will allow policymakers to prepare for future economic crises.

Testing the pecking order theory of capital structure in an Islamic legal system: the case of Saudi Arabia

PurposeThe purpose of this paper is to examine whether the basic premises according to the pecking order theory (POT) provide an explanation for the capital structure mix of firms operating under Islamic principles.Design/methodology/approachPooled ordinary least squares, fixed and random effects regressions were performed to test the POT applying data from a sample of 66 Islamic-compliant firms listed on Saudi Stock Market over the period 2006–2016.FindingsThe results show that sale-based instruments (Murabahah, Ijara) track the financial deficit quite closely followed by equity financing and as a last alternative to finance deficit, Islamic-compliant firms issue Sukuk. In the crisis period, these firms seem more reliant on equity, then on sale-based instruments and on Sukuk as last option. The study findings also indicate that the cumulative financing deficit does not wipe out the effects of conventional variables, although it is empirically significant. This provides no support for the POT attempts by Saudi Islamic-compliant firmsResearch limitations/implicationsThis research contributes to the theory of capital structure in re-validating the findings of a previous theoretical and empirical study. It helps understand the capital structure of Islamic-compliant firms in comparison with conventional firms. It highlights some areas where further research on topics related to capital structure of Islamic-compliant firms is needed. The failure of the POT to explain Saudi firms’ financing choices strongly pushed researchers to test the market timing theory for the Saudi Stock Market. Further research studies could re-examine the trade-off theory in the absence of interest tax shield as in an Islamic economy.Practical implicationsFrom a managerial perspective, this research can serve firm executive managers in their financing decisions to add value to the companies. Furthermore, policymakers, bankers and standard-setting organizations should undertake more collective work to simplify the process of issuing Islamic financial instruments including Sukuk. Moreover, the Saudi Government has to encourage the private sector to be more innovative in developing products and services that are in line with Sharia principles. Finally, to attract investors, the Capital Market Authority has to encourage transaction, efficiency and liquidity of Islamic financial instruments.Originality/valueThe proposed study presents several originalities. First, it explores the implications of relevant Islamic principles on financing preferences of Saudi firms. Second, the present study enables us to investigate what the sudden abundance of liquidity, generated by the record levels of oil prices, implied for the firms’ financing behavior. Finally, it provides further evidence on the impact of financial crisis on the firms’ capital structure choice in a period of considerable slowdown in the world.

LBO and VC Investments in Recent Crises

This article describes the impact of economic and financial crises on the investment behavior and cash flow allocation of leveraged buyout (LBO) and venture capital (VC) funds. It complements prior research on the performance of private equity investments throughout the financial crisis. The authors base their empirical analysis on 10,073 LBO and VC deals from 1999 until 2018, provided by Thomson Reuters Eikon, and analyze the resilience of investments in various industries regarding volatility, maximum drawdowns, and investment returns. The empirical results show that LBO and VC funds withdrew their capital from the most volatile industry sectors during both the dot-com crisis (2000–2002) and the financial crisis (2007–2008). The data analysis confirms that these funds reduced their overall exposure to the markets during crises by holding back capital and allocating their money to less- volatile and more-crisis-resilient industries, such as energy and power. These findings extend crisis-related research by explaining how LBO and VC funds’ dynamic investment behavior during crises can positively affect investment performance. <b>TOPICS:</b>Private equity, financial crises and financial market history, performance measurement <b>Key Findings</b> ▪ The article shows that fund managers in LBO and VC funds allocate their investors’ capital into counter-cyclical and crisis-proof sectors and withdraw money from volatile sectors during an economic crisis. ▪ The findings demonstrate that this active change in the fund managers’ investment behavior during the crises may explain why LBO and VC funds can outperform comparable public equity indices. ▪ The article further shows that the allocation of capital in LBO and VC funds during crises is comparable to investors’ allocation behavior in the public equity markets, which is especially important considering the outperformance of PE and VC funds over public equity measured by the public market equivalent.

The Impact of Financial Crisis on Construction Projects - A Case Study: the Erbil Governorate in Kurdistan Region of Iraq

A crisis is a sudden situation that occurs because of unforeseeable consequences and unpredictable events. Financial crisis affects all the aspects of life including construction. Construction projects have quite several risks that can have an impact on the project objectives such as cost, time and quality. The objective of this study is to identify how the financial crisis has affected the construction projects in Erbil Governorate in Kurdistan Region of Iraq, by identifying 30 significant factors of financial crisis and their impact in construction projects, identifying 15 financial crisis results and analyzing their impact on cost, time, and quality of construction projects. This has been done through a design of a questionnaire. Data are collected from site visits. The questionnaire has been delivered to 148 stakeholders working in building construction sector in Erbil Governorate. A case study has been adopted for 15 constructed projects during financial crisis in order to to determine the effect of financial crisis on cost and time and to calculate the percentage of cost and time overruns during crisis.

The impact of global financial crisis on regulation S private debt market

This study examines the impact of the 2007–08 global financial crisis on issuance activity and yield spreads in the Regulation S private debt market. We explore the implications of the flight-to-quality effect by comparing two types of Regulation S issues subject to different jurisdictions and territorial boundaries - standalone Regulation S issuance and combined Regulation S and Rule 144A issues. Our results suggest that flight-to-quality is the main effect during the crisis; this effect partially reversed after the crisis. We find that debt issuance declined by more than 70% during the crisis, and the yield spreads jumped by 50 basis points relative to the pre-crisis period. This effect is more pronounced for the combined Regulation S and Rule 144A issues that comprise mostly speculative-grade issues. After the crisis, the number of Regulation S debt issues more than doubled, but the average credit rating declined. We also find the yield spread difference between the standalone and combined issuance shrank after the crisis. Our evidence supports market segmentation between the two types of issuances due to substantial differences in geographical jurisdictions, investor base, and credit quality.

Profitability of the Italian farming companies and the impact of financial crisis: a quantitative research using accounting data

The paper aims to reach a better understanding of the effects of the worst post-war economic crisis on the primary sector. It analyses profitability behaviour starting from the observation of some ...

Profitability of the Italian farming companies and the impact of financial crisis: a quantitative research using accounting data

Profitability of the Italian farming companies and the impact of financial crisis: a quantitative research using accounting data

СВІТОВІ ФІНАНСОВІ КРИЗИ ТА ЇХНІЙ ВПЛИВ НА МІЖНАРОДНИЙ БІЗНЕС

The article analyzes the consequences of the financial crisis for international trade as a form of international business. It was determined four main ways to support international trade by the financial sector, which are demonstrating the direct link between them. In particular, the financial sector helps to overcome the period between the need for means of production, transportation, etc. and the payment of such products by the importer; the financial sector provides services that help the exporter to receive payments in the least costly and risky way; financial institutions provide valuable information to investors / to traders; the financial sector provides insurance for certain risks associated with the trading process. In addition, it is determined that the impact of financial crises on international business can be determined indirectly by comparing the dynamics of key indicators of key economies (China, Russia, UK, USA, Germany) and Ukraine as a direct reflection of the solvency of international businesses. Given the following, based on the IMF data, an analysis of GDP at current prices, GDP deflator, gross debt of the general government sector, population, unemployment, total investment, exports and imports of goods and services was conducted. According to the results of the analysis, it was found that the financial crisis had a negative impact on the economic growth of the studied countries: the international image of four of the six studied countries (USA, UK, Russian Federation and Ukraine) decreased. Such trends have a negative impact on the development of international business in these countries. However, it is determined that the only among the studied countries, which in the analyzed period increases the globalization of the economy, thereby expanding the boundaries of their own international business, is China. It has been established that most of the studied countries have suffered significant economic losses, and their post-crisis period continues to this day. In particular, the United States, Germany, and the Russian Federation have seen rising unemployment since 2008, while governments in China, the United Kingdom, and Ukraine have seen their accelerating unemployment growth fall sharply. This situation against the background of the general global trend of slowing population growth may in the future lead to a reduction in international business due to reduced demand for products and services, on the one hand, and reduced production by reducing labor resources.

ОЦІНКА РЕЗУЛЬТАТИВНОСТІ ФУНКЦІОНУВАННЯ БАНКІВСЬКОЇ СИСТЕМИ УКРАЇНИ В УМОВАХ ФІНАНСОВОЇ НЕСТІЙКОСТІ

The article covers the problems of the functioning of the banking sector of Ukraine during 2018-2021, as one of the main sectors of the financial market and the national economy as a whole. When analyzing the state of the banking sector, regularities and general trends in the functioning of the banking sector of Ukraine have been established, and appropriate calculations have been made. The impact of global financial crises on the activities of banking structures, which must operate in conditions of constant financial instability, is described. Today, the whole world, including Ukraine, is on the verge of a global financial and economic crisis. This raises the question of whether Ukrainian banks have the necessary margin of resilience to vulnerabilities to the financial and economic crisis. In recent years, the functioning and development of the banking system has been characterized by increased financial stability, the level of bank capitalization, liquidity, some improvement in asset quality, reducing risks in banking, as well as the presence of positive structural changes. Today, Ukraine's banking system operates in a complex socio-economic and legal environment, most of which - macroeconomic instability, irrational structure of the industrial complex, the crisis of science and technology, imperfect fiscal and monetary policy, low level of effective demand - complicate sustainable development banking sector and increase competitiveness. In conditions of instability, intensification of turbulent processes, the development of the banking system requires new innovative approaches to determining the mechanisms of effective functioning and stable development based on a system-synergetic approach, which led to the choice and relevance of the chosen topic of this scientific article. Efficiency of banks is a multicomponent, multifaceted, multidimensional system characteristic that depends on many factors and is an effective indicator of performance of functions and achievement of goals and objectives of banks development provided financial stability based on financial stability and dynamic balance, achievement of multiplicative and synergistic effects.

The effect of global financial crisis on banking stocks: evidence from Indonesia Stocks Exchange

An interesting aspect of the public information arrival effect that has not been covered is the impact of global financial crisis (GFC) on banking stocks in Indonesia. The aim of this research is to investigate market reaction of banking stocks at the Indonesia Stocks Exchange (IDX) towards economic events on GFC regarding the events of the bankruptcy of Lehman Brothers on 15 September 2008 and the closing of IDX on 8 October 2008. In this research, the researchers conduct event study to explore the reaction of stock market regarding of these events on banking stocks. The results of this study find that there was a weak impact of the Lehman Brothers collapse towards banking stocks, however, there was a pretty strong impact of the IDX closure towards banking stocks at IDX.

One Size Does Not Fit All: TFP in the Aftermath of Financial Crises in Three European Countries

We analyse the impact of both the Global Financial Crisis of 2008 and the European sovereign and banking crisis of 2011-13 on firm-level productivity in France, Italy and Spain. We show that relying on a single break date in 2008 misses both the Eurozone crisis and countries' institutional specificities. Although leverage and financial constraints affect firm-level productivity negatively, high-leverage firms suffer more from financial constraints only in Italy, when they are relatively small or when their debt is of short maturity. These results call for approaches taking into consideration country-level characteristics of financial institutions and time varying financing constraints of the firms, instead of pooling data and adopting a common break date. One size does not fit all when it comes to identifying the impact of financial crises on firm level productivity.

Financial Crises and Human Development

This study examines the impact of financial crises on human development over a panel of 113 countries for the years 1980-2017. Special attention is given to the effects of different types of financial crises on overall human development and its components: health, education, and income. Relying on a System-GMM estimator, this study finds that financial crises are more important than political, institutional, and economic factors to explain the human development dynamics. Moreover, all types of financial crises have both short- and long-run adverse effects on human development and its components. Such deteriorations are permanent and increase the burden for future generations, especially for low-income households. Nevertheless, education is less affected by financial crises than health and income. Furthermore, low- and middle-income countries pay a higher price, in terms of human development loss, than developed countries as consequences of financial crises.

THEORETIAL BASIS AND CLASSIFICATION OF BANK BUSINESS MODELS

This article devoted to the issue of banking business models. The negative impact of financial crises on the banking system leads to the search for new tools for risk assessment and risk management. Today banking supervision in Ukraine is based on the methodology of the Supervisory Review and Evaluation Process. In addition to assessing capital adequacy and liquidity and corporate governance, this methodology involves also assessing the business models of banks, which determines the relevance of the research of this term. Therefore, the purpose of the study is determination the theoretical foundations of the concept of business model of the bank, as well as analysis of approaches to their classification. The study investigates the main theoretical approaches of defying the essence of the term «business model of the enterprise» and «bank business model». The author proposed its own definition of the term «banking business model», which can be represented as a system of bank management elements, including business processes, resources, technologies, their relationships with each other and with the external environment. The study summarizes the approaches to classification of bank business models by both as foreign and domestic scientists. The classification of bank business models on the different criterions is offered by the author. Of most practical relevance is the classification of business models of banks by their activities (depending on the source of resources and areas of their placement) and provides for the following types: traditional model, universal model, corporate model, retail model and investment model. The change of existing business models occurs with the active introduction of information technology in banking. The article offered the classification of business models according to the level of digitalization. The traditional business model (does not involve the use of information technology), online banks (operate mainly through software interfaces), mixed business model (combines the two previous ones). The results of the study can be the basis for the development of indicators for the analysis of business models of banks, as well as the identification of business models of banks in Ukraine and identify the risks specific to each of them.

Endogenous growth, firm heterogeneity and the long-run impact of financial crises

How does firm heterogeneity affect the long-run consequences of financial crises? To answer this question, I introduce aggregate shocks and differences in the innovative potential of firms into a Schumpeterian endogenous growth model. Firm heterogeneity amplifies the effects of a financial crisis on aggregate innovation, because small firms are both relatively more innovative than large firms and hit harder by the crisis. A calibration using manufacturing data from Spain shows that a representative-firm model which ignores these mechanisms underestimates the long-run output losses due to the 2008-2013 crisis by around 40%.

Financial contagion between the financial and the mining industries – Empirical evidence based on the symmetric and asymmetric CoVaR approach

In globalised economies, the extent, intensity and speed of the spreading of economic crises are rapidly growing. This increases the risk of doing business on a macro- and microeconomic scale. Prevention of the negative consequences of cumulative crises requires a careful study of the mechanisms of their emergence and dissemination. The main purpose of the article is to identify the contagion effect between the financial and mining sectors in eight countries, in which the raw materials industry plays an important role in economic development (Australia, Canada, China, India, Russia, South Africa, the UK and the USA). Until now, research in this area has rarely been carried out. Our results allow to indicate the direction and time distribution of cross-sectoral contagion using symmetric and asymmetric CoVaR. The research period covered the years 2008–2019, divided into three four-year time windows (2008–2011, 2012–2015, 2016–2019). The analysis was conducted at the level of both entire markets and individual entities. For “entire markets” we used the Thomson Reuters (ThR) or FTSE stock market industry indices (banking and mining), depending on the availability of the index in the ThR database. In the case of the “individual level”, the research sample comprised of three out of ten of the largest (in terms of market value at the end of 2018) banks (or bank holding companies) and mining enterprises in each country, for which stock quotations were available in the ThR database. The conclusions of the research indicate the strong impact of financial crises on the mining industry, which suggests that the banking sector was a source of financial contagion for the mining sector. In addition, our results indicate the possibility of reversing the direction of the contagion effect in the case of economies, where the raw material industry plays a strategic role and is an important determinant of economic growth. The results obtained contribute to the economics of resources and can be used in forecasts regarding the spread of crises in the financial and mining industries. Proper recognition of the direction and time distribution of the contagion effect may also be useful when selecting macro- and microeconomic tools of anti-crisis policy.

금융위기로 인한 실질실효환율, CPI 및 실질GDP의 중국 섬유산업 수출 구조변화 영향 연구

금융위기로 인한 실질실효환율, CPI 및 실질GDP의 중국 섬유산업 수출 구조변화 영향 연구

How the Global and Gulf Financial Crises Affected Pakistan: Ten‐year Review0

ABSTRACTWe show that the impact of global financial crisis (GFC) on Pakistan's economy mainly transmitted through Gulf Financial Crisis (GCC). In this regard, we assess the effects of both the global and Gulf financial crises on remittances, workers' emigration, return migration, national savings and foreign investment. Applying Exploratory Data Analysis (EDA) before (2000–07) and after GFC (2008–18), we demonstrate that Pakistan witnessed remarkably low FDI inflows and labour force emigration along with higher return migration rates after the crises. Investment from the UAE and other Gulf countries declined eightfold immediate after the global financial crisis, contributing considerably to the decline of the country's GDP growth during 2008–10. There was significant curtailment in emigration volumes and spurts in return migration after 2012, because of the Gulf oil price crisis. The positive trend in remittances until 2015 seems to be influenced by post‐9/11 anti‐money laundering legislation and depreciation of the rupee.