Finance and Financial Management Commons^™

Dividends And Bank Capital In The Global Financial Crisis Of 2007–2009, Viral V. Acharya, Irvind Gujral, Nirupama Kulkarni, Hyun Song Shin

Journal of Financial Crises

The headline numbers appear to show that even as banks and financial intermediaries suffered large credit losses in the Global Financial Crisis of 2007–2009, they raised substantial amounts of new capital, both from private investors and from government-funded capital injections. However, on closer inspection, the composition of bank capital shifted radically from one based on common equity to that based on debt-like hybrid claims such as preferred equity and subordinated debt. The erosion of common equity was exacerbated by large-scale payments of dividends, in spite of widely anticipated credit losses. Dividend payments represent a transfer from creditors (and potentially taxpayers) …

The Effect Of A Financial Crisis On Household Finances: A Case Study Of Iceland’S Financial Crisis, Axel Hall, Andri S. Scheving, Gylfi Zoega

Journal of Financial Crises

Iceland experienced a financial crisis in 2008–2009 when its banking system collapsed, the currency lost half its value, most businesses became technically insolvent, house prices fell, and household debt increased due to indexation to foreign currencies or the price level. This paper tells the story of the crisis and maps the losses to households using a dataset from tax returns that includes all taxpayers in the country and contains the value of housing, mortgage debt, disposable income, and net worth. For relative losses in net worth, the results show that families with children, especially those with parents aged between 24 …

Italy (2008) Capital Injections, Manuel León Hoyos

Journal of Financial Crises

In response to the 2007–09 Global Financial Crisis, in October 2008, the Italian government announced urgent measures to guarantee financial stability and the flow of credit. The Italian government targeted three areas of support: (1) bank recapitalizations, (2) liquidity access, and (3) expansion of guarantees on bank deposits. This case study exclusively examines the Italian bank recapitalization scheme introduced in December 2008 in line with European Union State Aid rules.

The four Italian banks recapitalized in 2009 under the scheme were Banco Popolare (€1.45 billion), Banca Popolare di Milano (€500 million), Credito Valtellinese (€200 million), and Banca Montepaschi di Siena …

Greece (2008) – Capital Injections, Manuel León Hoyos

Journal of Financial Crises

In October 2008, in the midst of the Global Financial Crisis (2007–09), the Greek government announced a €28 billion ($36 billion) government package. Greek Law 3723/2008, “Enhancement of Liquidity in the Economy in Response to the Impact of the International Financial Crisis,” was passed and approved under European Union State Aid rules. The Greek law provided for three voluntary programs: recapitalizations (€5 billion), guarantees (€15 billion), and securities (€8 billion). This case study exclusively examines the recapitalization program. In this program, the Greek government acquired convertible preferred shares in banks in order to build and maintain banks’ Tier 1 capital …

The Greek Credit Guarantee Scheme (Greece Gfc), Daniel Thompson

Journal of Financial Crises

Beginning in 2008, many Greek banks began to face liquidity strains and capital problems as a result of the global financial crisis. In October 2008, Eurozone leaders released a declaration requiring all participating nations to ensure adequate liquidity, facilitate ease of funding, and recapitalize banks. On November 7, 2008, the Greek Ministry of Economy and Finance submitted a draft law, Law 3723, to the European Commission to fulfill the above directives through the Bank of Greece (BOG). While Law 3723 consisted of three main “pillars,” the focus for this case is pillar II, the credit guarantee scheme, otherwise known as …

Financial Soundness Indicators And Macroeconomic Variables: An Empirical Investigation Of The Dynamic Linkages, Baba N. Yaaba

Bullion

The Financial soundness indicators compiled for Nigeria within the context of IMFs Financial Sector Assessment Programme has been proven to be capable of pre-empting financial crisis. Analysts, however, considered it imperative to further explore the characteristics of the indicators, particularly their relationship with other macroeconomic variables to enhance the understanding of its dynamics so as to improve on its usefulness. This study, as a maiden attempt, applies Autoregressive Distributed Lag (ARDL) approach to investigate the dynamic linkages between the indicators and selected macroeconomic variables covering the period 2007 Q1 to 2015 Q4. The results indicate that macroeconomic events dictate the …

Commercial Bank Small Business Lending Pre And Post Crisis, Kevin T. Jacques, Richard Moylan, Peter J. Nigro

The Journal of Entrepreneurial Finance

We analyze small business lending at U.S. commercial banks, how it has changed over time and how it differs by bank size. Specifically, we examine the impact of government policy intervention on small business lending in the aftermath of the financial crisis. We find several important results. First, we find that the Troubled-Asset Relief Program’s (TARP) $200 billion Capital Purchase Program (CPP) had little impact on the banks that received capital injections’ small business lending. Second, the Small Business Loan Fund (SBLF) lending program appears to have been a success as banks participating in the loan fund increased their lending …

Estimating The Short-Run Supply Curve Of Higher Education, Carter Davis, Taylor Nadauld

Journal of Undergraduate Research

The original project that I set out to research with this ORCA grant was to investigate how the real estate bubble spread leading up to the financial crisis, using an incredible 90 gigabyte dataset of mortgage information. Two unfortunate events occurred during the course of this project: the external hard drive that stored the data was lost and a programming error on my part destroyed the data on the BYU supercomputer. Dr. Nadauld and I were devastated. Instead of investigating how bubbles spread, I set out to estimate the slope of the supply curve of higher education. Dr. Nadauld and …

Do Shareholders Penalize Bank Boards And Management For The Financial Crisis?

Fordham Business Student Research Journal

The 2007-2008 financial crisis was a pervasive shock that profoundly impacted the financial services industry. Often described as the worst economic crisis since the Great Depression, this event provides a unique opportunity to examine the consequences experienced by members of boards of directors and top management at bank holding companies for what shareholders may perceive as failures in oversight and excessive risk-taking. This study examines whether shareholders penalized top management at banks and provides some new evidence of the crisis’s impact on management careers. Using the 36 largest American bank holding corporations by assets as a sample, we examine director …

Reforming The Nigerian Banking Sector: Some Emerging Issues., Biodun Adedipe

Bullion

When the ongoing reforms of banking in Nigeria commenced, there were several arguments against the seeming harshness of the measures. As the revelations increased, the argument became the manner the revelations were made. All these pointed to the capacity of humans to resist change. lt was generally accepted that things went terribly wrong and some drastic steps needed to be taken. This paper examines existing and emerging financial reforms in the Nigeria banking sector. The outcome of the greed-induced crisis was not peculiar to Nigeria, as banks failed all around the world as their capital was eroded. There are obvious …

The Nigerian Financial Crisis: Lessons, Prospects And Way Forward, Charles N. O. Mordi

Bullion

This paper x-rays the recent banking sector crisis in Nigeria, its resolution, lessons learned and way forward. The paper is divided into six main sections. Following the introduction, section 2 highlights country experiences of banking crisis and resolution options, while section 3 gives an overview of financial crisis in Nigeria; section 4 discusses the recent financial crises in Nigeria (2000-2009), while section 5 presents the 2009 banking crises and its causes. The most recent reform measures are discussed in section 6. ln sections 7 and 8, the lessons of experience and the way forward are presented, while the concluding remarks …