Financial crises are often characterized by sharp reductions in liquidity followed by cascades of falling prices. Researchers are making progress in work to understand the levels of liquidity on a daily basis, but understanding the vulnerability of liquidity to market shocks remains a challenge....

Structured finance is often mentioned as the main cause of the latest financial crisis. We argue that structured finance per se did not trigger the last financial crisis. The crisis was propagated around the world because of poor risk management such as agency problems in the securitization...

Minsky proposed classifying firms in three categories: 1) hedge finance units which borrow no more than they are able to service in interest and principal out of operating cash flows, 2) speculative finance units which are over-leveraged to the point where they can service interest on their debt...

Do rating agencies increase or decrease financial market stability? This paper analyzes whether credit rating agencies may help to avoid inefficient self-fulfilling credit defaults. If investors follow risk-dominant strategies, we show that rating announcements and investors' private information...

This paper is concerned with the allegation that fair value accounting rules have contributed significantly to the recent financial crisis. It focuses on one particular channel for that contribution: the impact of fair value on actual or potential failure of banks. The paper compares four...

We apply computational linguistic text mining (TM) analysis to extract and quantify relevant Chinese financial news in an attempt to further develop the classical early warning models of financial distress. Extending the work of Demers and Vega (2011), we propose a measure of the degree of...

In recent years, U.S. government entities have become increasingly active as commercial participants in corporate restructurings by providing rescue loans when private market funding is unavailable. Like private lenders, the government can effectively control the operations of distressed...

This study examines the information transfer effect of credit events across the industry, as captured in the Credit Default Swaps (CDS) and stock markets. Positive correlations across CDS spreads imply dominant contagion effects, whereas negative correlations indicate competition effects. We...

This paper investigates the impact of the news announcement of the Lehman Brothers' (LBs) bankruptcy on the performance of the New York Stock Exchange (NYSE) sectors and financial industries. Based on descriptive index level results, Bartram and Bodnar (2009) conclude that the reaction of all...

I examine the real effects of financial markets on the timing of vehicle firms' safety-related recalls. Firms strategically time recalls in response to previously issued long-term debt prescheduled to mature by the end of the fiscal year in which defective products are manufactured. Maturing...