Inadequate risk management and inappropriate remuneration practices in the financial sector are placed squarely at the center of the financial crisis. Other investigations suggest that the failure of corporate governance is a major factor in the financial crisis.
Literature review
Does corporate governance “cause” the financial crisis
Risk management and the financial crisis
Risk management, corporate governance
Regarding the relationship between the independence of the board and the risk of liquidity, the first to examine the debate was Anderson et al. They found that the more independent the board, the more the cost of debt falls.
Results
Corporate governance stock returns volatility
In this method, we can also see that the audit size has a negative and significant impact on the stock return volatility. Moreover, the results indicate that the stock return volatility has a negative and significant (1%) impact on the independent directors.
Risk management and the financial crisis
The diagnostic tests in Table 5 show that the model [Eq. 2)] presentation of the effect of stock return volatility on the independent director is well equipped with statistically insignificant test statistics of first order autocorrelation in first differences (AR1) and Hansen J statistic for overidentifying restrictions. In Table 9, the results confirm that an exchange rate is negatively and significantly correlated with stock return volatility.
Risk management and corporate governance
From Table 1, we find that the skewness coefficients are positive in some cases and negative in others; this is why the distribution of the variables shifts asymmetrically to the left for some variables (the board) and to the right for others. Our results showed that the model's stationarity constraint is verified (α+β < 1) for all the equations, supporting a weak presence of effect ARCH and GARCH.
Conclusion
Stock price volatility and overreaction in a political crisis: The consequences of corporate governance and financial crises - a selection of lectures. Foreign institutional investors and corporate governance in emerging markets: Evidence from a split share structure reform in China.
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Introduction
Recently, a few research papers examining the causes of the Great Recession by prominent economists (ie Gertler and Gilchrist [1], Kehoe et al. [2]) have been published in terms of macroeconomic models, e.g. dynamic stochastic general equilibrium (DSGE) models. And this advantage is also useful for estimating a time-varying stochastic volatility (SVs) of the structural shocks including financial shocks in the DSGE model and for estimating the contribution of financial frictions on the real economy both during the Great Recession and after it, because this the frame allows the structural shocks to relax the specifications thanks to large data set.
Model
These two financial frictions are designed to reflect the two different relationships between corporate and banking sector balance sheets and the agency costs of borrowers to lenders, respectively. Disentangling the effects of the two financial frictions on macroeconomic fluctuations may be important for uncovering the origins of the Great Recession, as well as for measuring the extent of damage to the US economy.
Estimation methods and data 1 Econometric methods
- Setting of four cases
- Data description
Within the framework of the data-rich environment, we make a one-to-many matching relation between StandXt, whereas a standard DSGE model takes a one-to-one matching between them, as shown in Figure 2. The first case (referred to as case A) concerned one of the standard DSGE -the models that used 11 observable variables in the measurement equation and the structural shocks with i.i.d. 11 observations of Cases A and B are in the first 11 rows of this table, while 40 observations of Cases C and D are all of the table including residuals.
The model variable to which each observation belongs is described in the second column of the table. A more detailed explanation of the observations can be found in the Appendix section at the end of the chapter.). Notes: The four panels show 11 series included in the financial and non-financial sectors corresponding to the four variables of the two financial frictions model.
Empirical results
- Structural shocks and their volatilities
- Historical decompositions
As in these graphs, in a normal period, say before a recession, much of the dark blue lines (cases B and D) are below the red dashed lines (cases A and C). Meanwhile, the SVs of the remaining shocks appear to be muted and level off between 1990:Q1 and 2007:Q3. In this study, we would like to test whether a data-rich approach contributes to the accuracy of estimated SVs compared to a standard data structure.
In particular, the size of the two large adverse shocks is classified in cases B and D with SV shocks, as shown in Figures 4(b) and 5(b). Cases C and D showed that the positive impact of the corporate wealth shock (green shaded area) was smaller than case A, and that the bank wealth shock (deep blue shaded area) accounted for half the decline of both recession and recession variables. the TFP shock. During the recession, two negative wealth shocks from both sectors worsen the balance sheets of the banking sectors, indicating a sharp peak in the ratio.
Discussion and remark
On the other hand, TARP would have been effectively workable and could have turned the net worth of financial companies positive, which would have contributed to a fall in the borrowing rate after 2010: Q1. However, the countercyclical movement of the bank's leverage ratio was not generated by the banking model of Gertler and Kiyotaki [12], which is one of our financial frictions in the banking sector. Third, there is another important finding from the historical analysis, which is the behavior of the bank's balance sheet shock.
A sharp reduction in the shock on the bank's balance sheet was clearly related to the Great Recession, and rapid declines in output and investment resulted from two wealth shocks, as shown in Figures 7 and 8. Immediately after the end of the Great However, recession quickly turned the bank's balance sheet shock from negative to positive, boosting both output and investment. That is, TARP would have successfully made the downward trend of the bank's balance sheet change upwards.
Conclusion
Sources of the Great Recession: A Bayesian approach to a data-rich DSGE model with time-varying volatility shocks. This chapter provides a contextual background for those that follow by describing the GFC and its salient characteristics and identifying salient causes of the crisis. Financial economists generally trace the beginning of the GFC to around mid-2007, when a number of key mortgage lenders specializing in sub-prime mortgages experienced financial problems.
This chapter looks at the main causes of the crisis, while developing a discussion on the contribution of each individual factor to the onset of the financial crisis. Section 3, the main body of the chapter is a discussion of GFC 2007, with a special emphasis on housing bubble. This section looks at a number of contributing factors to the GFC, including but not limited to economic, financial, legal and behavioral factors that may have contributed to the onset of the crisis.
Speculative asset bubbles in modern financial history
The speculative asset bubble is believed to be built on leverage and loose government economic policies. Even though the public's expectation was an economic depression, with the federal guarantee that they would guarantee the credit of market makers, the recession never happened [15, 16]. Backed by large investment banks, small banks funded brokers by buying loans for the mortgage broker.
Lending to the subprime market was significant by then, fueling the housing bubble. 2012) identifies the 2007-8 Global Financial Crisis resulted in significant negative impact around the world, while. Humans never seem to learn from their mistakes as greed becomes the prominent decision-making factor for human financial decision-making. 4 The main factor that sets GFC apart from the rest of the crises is the fact that DFC 2007 was based on a housing bubble. However, a deep analysis delighted that the underlying mechanism of the GFC is no different from the rest.
The global financial crisis (GFC)
- Law creates incentives
- Uncertainty, information asymmetry, complexity and ‘sophisticated’
- Suboptimal contracting
- Lack of accountability and the role of ethics
- Overconfidence and domestic systemic risk
- Cross-border securitization as regulatory ‘arbitrage’
- Was pre-GFC securitization law suboptimal?
The following is a brief discussion of the incentives created by legislation at the beginning of the GFC. Changes in the law can strengthen and negate own interests, where each strategic response to the incentives created has costs and benefits. Financial innovation, in the form of asset-backed securities issued under securitization schemes, largely facilitated much of the indirect investment by domestic and foreign institutions in the United States.
This affects who, in the event of a significant default or insolvency, is likely to incur default losses in respect of the securitized asset. All of the high-profile investment banks, noted earlier, that faced difficulties during the subprime crisis were market makers. In case of insolvency, the limited liability of the securitizer and the other contracting parties in the securitization chain.
Summary
External factors on Turkish short-term interest rates and daily exchange rates: Quiet periods versus politically stressed times. With this we aim to shed light on the reaction of Turkish interest rates and exchange rates to US short-term interest rates and emerging market volatility. 21] examine the impact of international interest rate shocks and emerging market risk premia on domestic interest rates and exchange rates for both developing and developed countries.
According to that in Mexico and Argentina, emerging market risk premia have a major impact on interest rates. 22] Demirel examines the impulsive reactions of the Turkish economy to the US interest rate shocks. Therefore, in this study, following on from those studies, I want to construct a vector autoregression model (VAR) to investigate the effect of external shocks on Turkish short-term interest rates and the exchange rate.
Data and methodology 1 Data
- Methodology
- The full period (January 1, 2011–December 31, 2018)
- The political stress #1 (July 29, 2011–August 11, 2011)
- The political stress #2 (May 28, 2013–June 20, 2013)
- The political stress #3 (December 17, 2013–January 3, 2014)
- The political stress #4 (July 31, 2014–August 15, 2014)
- The political stress #5 (June 7, 2015–August 25, 2015)
- The political stress #6 (November 24, 2015–November 29, 2015)
- The political stress #7 (July 15, 2016–July 30, 2016)
- The political stress #8 (July 2, 2018–October 2, 2018)
- Politically tranquil periods with significant depreciation of Turkish Lira and rise in interest rates
According to it, shocks coming from emerging markets significantly affect Turkish short interest rates and USD/TRY in the first 2 days. In contrast to the US short rates, the impact of the risk premiums from the emerging markets on the Turkish short rates and Turkish exchange rates disappears in the longer term. During the political stress #1 of emerging markets, the risk premiums significantly affect both the USD/TRY pair and the Turkish short interest rates.
During this period, the Turkish currency responds significantly to changes in short-term US interest rates on the first and second day. During this period, developing risk premiums have a significant impact on short-term interest rates as well. However, this time, the Turkish short-term interest rate responds significantly to shocks from US interest rates.
However, Turkish short-term interest rates respond significantly to US short-term interest rates beyond 10 days. Following those developments, local news appears to have a greater effect on short-term interest rates and the exchange rate compared to the external factors.
