This thesis investigates different aspects of the impact of extreme downside risk on stock returns. We first investigate the impact at market level, where the return of the stock market index is expected to be positively correlated to its tail risk. More specifically, we incorporate Markov switching mechanism into the framework of Bali et al. (2009) to analyse the relationship between risk and returns under different market regimes. Interestingly, although highly significant in calm periods, the tail risk-return relationship cannot be captured during turbulent times. This is puzzling since this is the time when the distress risk is most prominent. We show that this pattern persists under different modifications of the framework, including expanding the set of state variables and accounting for the non-iid feature of return process. We suggest that this result is due to the leverage and volatility feedback effects. To better filter out these effects, we propose a simple but effective modification to the risk measures which reinstates the positive extreme risk-return relationship under any state of market volatility. The success of our method provides insights into how extreme downside risk is factored into expected returns. In the second investigation, this thesis explores the impact of extreme downside risk on returns in a security level analysis. We demonstrate that a stock with higher tail risk exposure tends to experience higher average returns. Motivated by the limitations of systematic extreme downside risk measures in the literature, we propose two groups of new ‘co-tail-risk’ measures constructed from two different approaches. The first group is the natural development of canonical downside beta and comoment measures, while the second group is based on the sensitivity of stock returns on innovations in market systematic crash risk. We utilise our new measures to investigate the asset pricing implication of extreme downside risk and show that they can capture a significant positive relationship between this risk and expected stock return. Moreover, our second group of ‘co-tail-risk’ measures show a highly consistent performance even in extreme settings such as low tail threshold and monthly sample estimation. The ability of this measure to generate a number of observations given limited return data solves one of the most challenging problems in tail risk literature. In the last investigation, this thesis examines the influence of extreme downside risk on portfolio optimisation. It is motivated by the evidence in Chapter 4 regarding the size pattern of the extreme downside risk impact on stock returns where the impact is larger for small stocks. Accordingly, portfolio optimisation practice that focuses on tail risk should be more effective when applied to small stocks. In comparing the performance of mean-Expected Tail Loss against that of mean-variance across size groups of Fama and French’s (1993) sorted portfolios, we confirm this conjecture. Moreover, we further investigate the performance of different switching approaches between mean-variance and mean-Expected Tail Loss to utilise the suitability of these optimisation methods for specific market conditions. However, our results reject the use of any switching method. We demonstrate the reason switching could not enhance performance is due to the invalidity of the argument regarding the suitability of any optimisation method for a specific market regime.

This dissertation studies the effects of credit availability on firm-level outcomes using a new matched employer-employee panel of Chilean firms that also includes firm-bank lending and tax data. In Chapter I, using a natural experiment and a differences in differences approach, I show that firms that experienced a positive credit supply shock during the 2008-09 recession in Chile, exhibit higher labor productivity four years after the shock, even after aggregate demand and credit supply have fully recovered. Chapter II presents evidence consistent with the hypothesis that at least part of the productivity improvement is due to an increased ability of firms with access to credit to adjust labor during the recession. In particular, I find that these firms exhibit larger worker flows and use credit to adjust employment by churning more workers. Chapter III studies a government partial credit guarantee scheme for bank loans to small and medium sized enterprises using a regression discontinuity design around the threshold for eligibility. I show that the program has a large positive causal effect on firms' total borrowing, and the effect is persistent. Moreover, firms that obtain bank loans through this scheme can borrow more from loans not insured by the guarantee, which means that the program has a positive effect on the firms's total borrowing capacity. Finally, the program also helps in the formation of new bank-firm lending relationships.

Historically, credit market conditions have been shown to impact economic activity, at times severely. For instance, in the late 2000s, the United States experienced a financial crisis that seized domestic and foreign credit markets. The ensuing lack of access to credit brought about a steep decline in output and a sluggish recovery. Accordingly, policymakers commonly take steps to mitigate the effects of adverse credit market conditions and, at times, conduct unconventional monetary policy once traditional policy tools become ineffective. This dissertation is a collection of essays regarding monetary policy, the flow of credit, financial crises, and the macroeconomy. Specifically, I describe monetary policy’s impact on the allocation of credit in the U.S. and analyze the role of upstream and downstream credit conditions and financial crises on international trade in a global supply chain. The first chapter assesses the impact of monetary policy shocks on credit reallocation and evaluates the importance of theoretical transmission mechanisms. Compustat data covering 1974 through 2017 is used to compute quarterly measures of credit flows. I find that expansionary monetary policy is associated with positive long-term credit creation and credit reallocation. These impacts are larger for long-term credit and for credit of financially constrained firms and firms that are perceived as risky to the lender. This is predicted by the balance sheet channel of monetary policy and mechanisms that reduce lenders’ risk perceptions and increase the tendency to search for yield. Furthermore, I find that, on average, the largest increases in credit creation resulting from monetary expansion are to firms that exhibit relatively low investment efficiency. These estimation results suggest that expansionary monetary policy may have a negative impact on future economic growth. The second chapter evaluates the quantitative effects of unconventional monetary policy in the late 2000s and early 2010s. This was a period when the traditional monetary policy tool (the federal funds rate) was constrained by the zero lower bound. We compute credit flow measures using Compustat data, and we employ a factor augmented vector autoregression to analyze unconventional monetary policy’s impact on the allocation of credit during the zero lower bound period. By employing policy counterfactuals, we find that unconventional monetary policy has a positive and simultaneous impact on credit creation and credit destruction and these impacts are larger in long-term credit markets. Applying this technique to analyze the flows of financially constrained and non-financially constrained borrowing firms, we find that unconventional monetary policy operates through the easing of collateral constraints because these effects are larger for small firms or those with high default probabilities. During the zero lower bound period, we also find that unconventional monetary policy brings about increases in credit creation for firms of relatively high investment efficiency. The third chapter pertains to the global trade collapse of the late 2000s. This collapse was due, in part, to strained credit markets and the vulnerability of exporters to adverse credit market conditions. The chapter evaluates the impact of upstream and downstream credit conditions and the differential effects of financial crises on bilateral trade. I find that upstream and downstream sectors’ needs for external financing is negatively associated with trade flows when the exporting or importing country’s cost of credit is high. However, I find that this effect is dampened for downstream sectors. I also find that downstream sectors’ value of collateral is positively associated with trade when the cost of credit is high in the importing country. High downstream trade credit dependence coupled with high costs of credit in the importing country also cause declines in imports. There are amplifying effects of credit costs for sectors that are highly dependent on external financing when the importing or exporting country is in financial crisis. Further, the magnitude is larger when the exporting country is in financial crisis. Finally, I find that these effects on trade flows are large when the exporting country is a developed economy, but they are muted for developing economies.

Cette thèse se compose de trois chapitres distincts. Le premier chapitre examine le lien de causalité entre l’offre de prêts syndiqués par des banques et les contributions de campagnes électorales par des entreprises non-financières aux États-Unis au cours de la crise financière de 2007–2008. Les résultats indiquent qu’une diminution de 10% de l’offre de prêt à une entreprise donnée par ses prêteurs pré-crise pendant la première période de crise entraîne une augmentation de 9% des contributions de campagne par cette entreprise en 2008. De plus, le niveau de contributions de campagne par des entreprises dans le passé est positivement associé à des conditions de prêt favorables dans l’avenir. Les résultats appuient l’idée que les contributions de campagne sont un investissement dans le capital politique plutôt qu’une simple forme de bien de consommation. Le deuxième chapitre identifie l’effet d’exposition industrielle de banques avant leur entrée sur le marché sur la croissance de production des secteurs de fabrication. Les résultats indiquent que plus grande est la différence de spécialisation dans un secteur entre deux états, plus grand est l’impact d’intégration bancaire sur la croissance de ce secteur dans l’état qui est moins spécialisé. Le dernier chapitre examine si l’intégration bancaire dans plusieurs régions a un impact sur le marché de contrôle des entreprises entre elles. Les résultats indiquent qu’il y a plus de fusions, acquisitions et cessions dans les paires d’états dont les systèmes bancaires ont connu une plus grande intégration, par rapport à des paires d’états sans une telle intégration. Les résultats dans les deux derniers chapitres indiquent un canal bancaire qui façonne le paysage industriel d’états. / This dissertation is made of three distinct chapters. The first chapter examines the causal link between banks’ syndicated loan supply and non-financial firms’ campaign contributions for US elections during the 2007-2008 financial crisis. The results indicate that a 10% decrease in loan supply of a given firm by its pre-crisis relationship lenders during the early crisis period leads to a 9% increase in firm’s campaign contributions in 2008. Further, firms’ level of past campaign contributions is positively associated with favorable loan terms for the future. The findings lend support to the idea that campaign contributions are an investment in political capital rather than merely a form of consumption good. The second chapter identifies the effect of banks’ industry exposures prior to market-entry on the output growth of manufacturing sectors through US bank-entry deregulations. The findings indicate that the larger the discrepancy in specialization in an industry between a state-pair, the higher the impact of banking integration on the growth of that sector in the state that is less-specialized. The last chapter examines whether banking integration across regions has any impact on the market for corporate control between them. The results show that there are more M&As and divestitures across state-pairs whose banking systems have experienced a higher integration, compared to state-pairs with no such integration. The findings in the last two chapters indicate a banking channel that shapes the states’ industrial landscape.

Thailand has been one of significant recipients of foreign direct investment (FDI) among developing countries over the last 30 years, and has recorded rapid and sustained growth rates in a number of different industrial categories. Thailand has shown a clear policy transition for foreign investment over time from an import-substitution regime to an export-oriented regime. Before the 1997 Asian Financial Crisis (1985-1996), Thailand had the fastest growing level of exports in manufactured goods among Asian economies. FDI plays a significant role in the Thai economy. Thailand has been pursuing different foreign investment policies at different times depending on the development objectives and economic situation in the country. The main objective of this research is to evaluate the determinants of FDI and foreign portfolio investment (FPI) in Thailand using the extended Gravity Model. Panel data is used to estimate and evaluate the empirical results based on the data for the years 1980 to 2004. It also examines the FDI flows between different locations and their geographical distances in Thailand. The primary research question addresses what factors motivate, attract, and sustain the FDI and FPI in Thailand. In addition, this study also examines the effects of the 1997 Asian Financial Crisis on the inflows of FDI and FPI into Thailand. The results show that the inflows of FDI in Thailand, which are supply-driven, are significantly influenced by its 21 largest investing partners. The 1997 Asian Financial Crisis has no impact on the determinants of the inflows of FDI into Thailand, but positively influences the inflows of FPI into Thailand. Our results also show that increases in GDP and trade between investing partners and Thailand potentially attract more FDI and FPI into Thailand. Investing partners closer to Thailand draw more portfolio investment into Thailand than distant partners – emphasising that distance has a negative impact on the portfolio investment but a negligible impact on the FDI.

<p><strong>Title:</strong> Yes, but…<em> - How changes in banks in Västerbotten are linked to the current financial crisis, but are still normal organizational development</em></p><p><strong>Background: </strong>In the beginning of the 90’s, there was a financial crisis in Sweden which hit Swedish banks hard. The Swedish bank Gota banken went bankrupt and Nordbanken was taken over by the government, in large part because of their apathetic reactions to the situation they were so surprised to find themselves in. Today, almost 20 years later, the banks of Sweden find themselves in a new crisis. Because of the important position banks have in society, it is extremely important that they remain stable and have the capacity to ride out a crisis situation comfortably. As the banks did not show any crisis management strategy or skills in the 1992 crisis, it is relevant to explore if the previous experience has given Swedish banks the ability to handle a crisis situation in an efficient way.</p><p><strong>Purpose:</strong> The purpose of this study is to apply organizational development theory, crisis management theory and adversity reaction theory to the primary data collected from the interviews with the banks and through that analyze if Swedish banks are acting to prevent the financial crisis from affecting them badly.</p><p><strong>Method:</strong> The study has a hermeneutical approach and was carried out by interviewing managers from the five major banks in Västerbotten. The primary data collected has been analyzed to get an understanding of the current development in the banks and its possible link to the financial crisis.</p><p><strong>Conclusion: </strong>We found that banks are constantly changing in order to keep up with their competitors, changes in technology, society and the increasing demands from customers. The current events and changes in the banks are undoubtedly linked to the financial crisis, it has accelerated change, it has slowed down ongoing processes and it has facilitated harder decisions and less popular changes. But the crisis has not caused drastic changes in the organizations or their way of doing business. In fact, it can be said that the changes due to the financial crisis is normal organizational development, as the banks have responded to it in much the same fashion as they do to all changes in the external environment.</p><p><strong>Key words:</strong> crisis management, organizational development, threat rigidity, prospect theory, financial crisis</p>

<p>Syftet med undersökningen är att få en ökad förståelse för hur de anställdas upplevelser av arbetsmotivation och stress ser ut i arbetet samt att se om finanskrisen har påverkat de anställdas upplevelser av arbetsmotivation och stress. Undersökningen är genomförd på Volvo Aero Corporation i Trollhättan. Uppsatsens teoretiska referensram är uppdelad i fyra huvuddelar: arbetsmotivation, stress, krav/kontroll/stöd och finanskris.</p><p>Uppsatsens datainsamlingsmetod är en kvalitativ och kvantitativ tvärsnittsstudie med enkäter och gruppintervjuer. Totalt har två gruppintervjuer utförts, samt en enkätundersökning med 122 deltagare. Det empiriska materialet delades upp i fyra olika kategorier, samma som i teoriavsnittet.</p><p>Resultatet visar att de anställda främst motiveras av arbetskamrater och varierande arbetsuppgifter. Motivationen har ökat något till följd av finanskrisen då de anställda stöttar varandra mer och de är även tacksamma att de har ett arbete att gå till. De anställda på Volvo Aero Corporation är stressade endast i viss mån och stressorer är bland annat för hög arbetsbelastning och för lite kontroll över arbetet. Finanskrisen har påverkat de anställdas stressupplevelser på så sätt att de har fått högre arbetsbelastning till följd av uppsägningar på grund av finanskrisen.</p> / <p>The purpose of the study is to obtain a better understanding of employee perceptions of work motivation and stress in the work environment and see if the financial crisis has affected the employees' experiences of work motivation and stress. The survey is conducted at Volvo Aero Corporation in Trollhättan. The theoretical frame of references is divided into four main parts: work motivation, stress, demands/control/support and financial crisis.</p><p>The method of collecting data is a qualitative and quantitative cross-sectional study with surveys and group interviews. A total of two groupinterviews conducted, and a survey with 122 participants. The empirical material was divided into four different categories, the same as in the theory section.</p><p>The result shows that employees are motivated primarily by colleagues and varied tasks. Motivation has increased slightly due to financial crisis when employees support each other more. They are also grateful that they have a job to go to. The staff at Volvo Aero Corporation is stressed only to a certain extent and stressors include excessive workload and too little control over work. The financial crisis has affected the employees’ stress experiences so that they have a higher workload because of layoffs due to the financial crisis.</p>

<p>Background/problem: Many business and industries have been hardly influenced of the occurrence of this financial crisis which is expected to be the worst financial crisis since 1929. Historically the luxury business has always been immune to uncertainties and crisis. It is of great interest to see how the luxury business reacts in the financial crisis from a marketing strategy perspective.</p><p>Purpose: To explain the impact of the financial crisis on the luxury business by using and identifying the nature of luxury and the suitable marketing strategies.</p><p>Methodology: A deductive philosophical approach and a positivistic and interpretative research approach are applied in this thesis.Findings: The luxury business has not been influenced by the financial crisis based on the interviews. The main reasons behind it are interpreted as the nature of luxury itself and its unique customers.</p><p>Conclusion: Based on our study and the involved companies, it is assumed that the luxury business is invulnerable to the financial crisis.</p>

<p>The ongoing financial crisis which has upset the financial markets of the world since the late summer of 2007 has not left Swedish corporations unaffected. Strategies which can be adapted within the firm to improve liquidity and cash flows concern the management of working capital and cash management, areas which are usually neglected in times of favourable business conditions.</p><p>In this study it is examined how companies have adjusted their liquidity strategies before the crisis started to spread worldwide and a year afterwards, in the beginning of the 2009 when economies are in the middle of the turbulence, still feeling the consequences of the financial crisis and not yet started to recover. Research problem consisted of two main questions:</p><p><em>Do active liquidity strategies have a positive effect on company’s profitability in times of financial turbulence/ economic turbulence? </em></p><p><em> </em></p><p><em>Have the importance of key ratios in the measurement of liquidity changed during the time period?</em></p><p>The primary purpose of the study was to evaluate and compare the use and extent of the liquidity practices in two time points. Furthermore, the aim was to measure if the changing of liquidity strategy is related to the profitability measured by return on assets (ROA).</p><p>Sample consisted of companies listed on Stockholm Stock Exchange’s Small and Mid cap- lists, with some restrictions. The quantitative research strategy was employed and data was collected by using telephone interviews and financial ratios from financial statements. Hypotheses tested different aspects of cash management and liquidity practices. Statistical analysis was conducted by using regression analysis of the change scores and profitability.</p><p>Overall findings suggested that the adaptation of liquidity strategies do not have a significant impact on ROA. Only increased use of liquidity forecasting and short-term financing during financial crisis had a positive impact on ROA. Moreover, it was found that the importance of the key ratios monitoring companies liquidity have not changed between the studied time points. Working capital ratio is the most commonly used liquidity measurement and in addition the use of working capital and DIO metrics has increased most during the crisis.</p><p>More frequent monitoring and forecasting on liquidity levels and making more short-term investments can provide gains in profitability Based on the findings the adjustment of liquidity practices is beneficial for the companies, even though benefits are not always directly measurable in profitability. Furthermore, companies are recommended to maintain their focus on liquidity and working capital management in an economic downturn.</p><p> </p>

<p>This study examines whether the performance of the Black-Scholes model to price stock index options is influenced by the general conditions of the financial markets. For this purpose we calculated the theoretical values of 5814 options (3366 put option price observations and 2448 call option price observations) under the Black-Scholes assumptions. We compared these theoretical values with the real market prices in order to put the degree of deviations in two different time windows built around the bankruptcy of Lehman Brothers (September 15th 2008) to the test. We find clear evidences to state that the Black-Scholes model performed differently in the period after Lehman Brothers than in the period before; therefore we are able to blame this event for our findings.</p>