This dissertation consists of three separate essays which address questions in the field of banking. The first two essays are motivated by the Great Recession, and study key aspects of the experience of commercial banks during this period. One is the impact of liquidity risk on credit supply, and the second is the effect of portfolio choices on the probability of bank failure. The third essay shifts the focus from commercial banks to M & A transactions, and studies the impact of a key provision in merger agreements on the initial offer premium and target firm value. In the first essay, titled "Liquidity Risk and the Credit Crunch of 2007-2009", I document the connection between liquidity risk and the credit crunch experienced during the financial crisis of 2007-2009. Using extensive micro-level data on mortgage loan applications, I construct a measure of the supply of credit that is free from demand-side bias. I then use this measure of credit supply to estimate the effect of cross-sectional differences in unused lines of credit and core-deposit funding on the supply of mortgage credit moving through the crisis. I find that lenders with higher liquidity risk contracted their supply of mortgage credit more. The channel of contraction was significantly stronger for larger lenders, which had the largest exposure to liquidity risk. The first phase of the contraction was due to liquidity risk arising from high exposure to lines of credit and was immediately followed by further tightening due to the collapse of the markets for wholesale funding. I estimate that the total contraction of mortgage lending due to liquidity stresses experienced by lenders during 2007-2009 was $41.5 billion - $61.9 billion, or 5.2%-7.8% of total mortgage originations during that period. In the second essay, titled "Commercial Bank Failures During The Great Recession: The Real (Estate) Story" I identify the channels through which shocks to the real estate sector contributed to the wave of commercial bank failures during the Great Recession. I focus on the banks' loan, marketable securities and credit line portfolios, and consider how choices which shifted the composition of each portfolio towards real estate products impacted the probability of bank failure. I find that augmenting a baseline model of failure with variables that capture the composition of these three portfolios improves the fit of the model by approximately 70% for small banks and 230% for large banks. I find no evidence that banks which held more of their loans in traditional closed-end mortgages suffered a higher probability of failure. Rather, it was investments in loans for multifamily properties and other non-household real estate loans, as well as off-balance sheet exposures to credit lines issued to non-household real estate borrowers, that are robustly identified as precursors of bank failure for both small and large banks. Exposure to open-end residential real estate loans contributed to the failure rates of small banks only. Exposure to private-label MBS is strongly associated with a higher probability of failure for large banks, but not for small ones. On the other hand, high holdings of agency MBS are associated with a higher probability of failure only for smaller banks, but this result is less robust. The third essay, titled "No Free Shop: Why Target Companies in MBOs and Private Equity Transactions Sometimes Choose Not to Buy 'Go Shop' Options" is joint work with Charles W. Calomiris and Donna M. Hitscherich. In this essay, we study the decisions by targets in private equity and MBO transactions whether to actively "shop" their initial acquisition agreements prior to the shareholders' approval of those contracts. Specifically, targets can insert a "go-shop" clause into their contracts, which permits them to use the agreement to solicit offers from other would-be acquirors during the "go-shop" window, during which the termination fee paid by the target is temporarily lowered. We consider the "go-shop" decision from the theoretical perspective of value maximization under asymmetric information, and also consider conflicts of interest on the parts of management, bankers, and attorneys that might affect the decision. Empirically, we find that the decision to retain the option to shop an offer is predicted by various firm attributes, including larger size, more fragmented ownership, and various characteristics of the firms' legal advisory team and procedures. These can be interpreted as reflecting a combination of informational characteristics, litigation risk, and attorney conflicts of interest. We employ legal advisor characteristics as instruments when analyzing the effects of go-shop decisions on target acquisition premia and value. We find, as predicted in our theoretical framework, that go-shops are not a free option; they result in lower initial acquisition premia, ceteris paribus. Our theoretical framework has an ambiguous prediction about the effects of go-shop choice on target firm valuation. Consistent with theory, we find no significant effect on abnormal returns from choosing a "go-shop" option.

Thesis (B.A.)--Haverford College, Dept. of Economics, 2009. / Includes bibliographical references.

Understanding characteristics of unemployment can contribute to labour market policies. Therefore this thesis investigates gender and ethnic unemployment during the recent 2008-2010 recession and spatial autocorrelation of unemployment using multivariate analysis, decomposition techniques, and panel SAR model which is innovatively adopted to examine the mechanism of causing spatial autocorrelation.

M.Comm. (Financial Management) / The costs of the 2007- 09 financial crises on global economies have resulted in new central bank rules to strengthen financial institutions. The question of whether there were any significant differences in capital structures between banks who were liquid and those who were liquidity constrained in the 2007– 2009 global financial crisis, still needs to be answered. Theoretical models on corporate failure partly explain how bank capital management impacts on whether a bank fails or not. This study investigates the differences in capital ratios between banks who were liquidity- stressed and those who were liquid. A comparative analysis of selected banking capital ratios were done followed by a discriminant analysis to determine if there is a relationship between the capital structures of liquid and liquidity- stressed banks. It was found that there were differences in capital structures of liquid and liquidity- stressed banks but capital ratios on their own, could not be used as early warning sign for bank failure.

The topic of financial contagion has attracted increased attention in economic literature over the past three decades; in particular after the Asian crisis of 1997. This dissertation investigates financial contagion and its effects on South Africa after the 2007 global financial crisis. In particular, it examines whether South Africa experienced contagion from the United States stock market to its own over the period 1 July 2007 to 1 April 2009 within the strict definition of contagion or otherwise: the fraction of exceedance events in the stock market that is left unexplained by its own covariates but is explained by the exceedance from another region. This is tested empirically with a binomial-nominal logistic model. In addition to this, various financial and trade transmission mechanisms are tested to empirically determine through which channels the crisis was propagated. The analysis makes use of quarterly data from January 2002 to April 2009, within an OLS framework, with a dummy variable differentiating the periods before and after the collapse of Lehman Brothers. The findings suggest that contagion was in fact not present in this crisis, which speaks to market rationality and indicates that the South African stock market did in fact react rationally to a changing macroeconomic environment over this period. The transmission mechanism analyses indicate that there was a change in the interdependence relationship between the two stock markets following the crash of Lehman Brothers in September 2008. It is apparent that both trade and financial variables played significant roles in the propagation of this crisis.

This dissertation investigates the effects of the financial crisis on the South African economy. In order to do this, an index which describes the financial conditions of the South African economy is constructed and computed. The index indicates that domestic South African financial conditions have deteriorated substantially during the period under study and so the study investigates how this has impacted on the country’s economic growth. A VAR model with South African variables is specified and used to assess the quantitative effects of the financial crisis on South African real GDP growth. Results suggest that the South African economy was not significantly affected by the crisis, but economic growth was slowed down and may still grow substantially slower in the next few years due to the financial crisis. These results corroborate the theoretical predictions and are also supported by previous studies.

Thesis (MBA)--University of Stellenbosch, 2010. / Revenue derived from the sales of diamonds contributes significantly towards economic growth, with a GDP share of about 10 per cent. A significant decline in diamond revenue will therefore affect economic growth and contributes negatively to the socio-economic upliftment of the Namibian nation. A case in point was the effects of the global financial crisis on the diamond industry. This study aims to analyse the impact of the global financial crisis on the diamond industry supply chain in the Namibian context. The supply chain analysis involves the studying of the whole chain from the mining of the ore into the chain to the delivering of the rough diamond to the cutting and polishing factories. The main sectors involved in the supply chain are the supply sector which is involved in the extracting of the ore from open-cast, underground, alluvial and sea-bed mines, processing the ore into rough diamonds ready for sorting. The processing sector is involved with maximising the value by undertaking valuations and sorting, which determine the price that is paid for the stones and the presentation sorting which is the process whereby diamonds are prepared for sale in line with clients’ polished requirements. The demand sector is involved in the sales and marketing of the rough diamonds. The following areas have been focused on to analyse the sectors: 1. The market competitiveness, using Porter’s 5-force analysis. 2. A SWOT analysis to determine internal and external environments of the respective sectors. 3. Trend reviews of the activity in each sector for the years 2000–2009. 4. The causes and the responses to the impact of the global financial crisis on each of the sectors. The aim of the analysis is to create a deeper insight into the forces and the impact these forces are having on the rough diamond supply chain. The research revealed that the 2007–2009 global financial crisis had a negative impact on the levels of diamond production in Namibia and also on the economic growth and the living standards of a number of retrenched workers. The study further reveals that despite the negative effects of the global financial crisis, there are positive signs of economic recovery and employment creation.

Thesis (MBA)--Stellenbosch University, 2012. / The use of leading indicators provides a valuable method to predict changes in macro-economic variables. However, the accuracy of the various models using leading indicators is a topic of constant debate. This study aimed to identify whether leading indicator models predicting residential house price changes performed as well during the recent global financial crisis (fourth quarter 2007 to second quarter 2012) as during the period directly before the crisis. Several potential drivers of the South African property market were identified with the help of previous studies on this topic. Following that, a quantitative analysis was done and single leading indicator models were built using regression analysis to evaluate the importance of each independent variable. This information was used to create a composite leading index for the South African housing market. The accuracy of these models were then compared to predict the changes in house prices during the period preceding the recent global economic crisis.It was found that the ability of these leading indicator models to predict house price changes during the recent global economic crisis decreased significantly.

The economic crisis of 2007 has had debilitating effects on the global economy, affecting GDP growth, unemployment and trade to name a few. In response to these economic effects, numerous policy interventions were implemented. There are various existing time-series methods available to determine better estimates of GDP growth rates, one of which is Stein’s Paradox which uses observed averages to estimate unobservable quantities which are closer to the true unknown GDP growth rates or theta (θ) in order to determine better growth rates post the economic crisis. The resulting James-Stein estimator (z) is said to be better than the arithmetic average, and thus a closer approximation to the true GDP growth rates which are unobservable. This dissertation analyses the effects of the 2008 financial crisis on the global economy, with specific reference to South Africa and America, and their corresponding policy interventions to determine the growth trajectory after the crisis. The main objective is to determine if better estimates of GDP growth can be calculated using Stein’s Paradox, across a sample of 30 countries, using quarterly GDP growth for the period 2005 to 2008. Annual GDP data was also used for the period 2009-2011, and future GDP growth rates were forecasted for the period 2012 to 2016. To reinforce the Stein’s Paradox, the Monte Carlo study is undertaken. It is used to determine how the James-Stein estimates perform under different conditions using a common c or unique c, and to determine which condition will provide more accurate GDP growth rates (Muthen. 2002). Analysis of time series data across a sample of 30 countries using Stein’s Paradox provided better estimates of GDP growth rates than the individual average growth rates for each country based on the lower standard deviation and total squared error of estimation achieved. This shows that the results are closer to theta and have a smaller amount of error, particularly when a common c was used. The Monte Carlo results indicate that better GDP growth rates are achieved when using a common c instead of a unique c given that a smaller standard deviation and variance is derived. Therefore the Monte Carlo study aims to reinforce or verify Stein’s Paradox. The study also indicates that emerging and developing countries seem to be the driving forces of growth in the future, while developed countries seem to be lagging behind. / Thesis (M.Com.)-University of KwaZulu-Natal, Pietermaritzburg, 2013.

The international financial environment has become riskier due to the recent developments in product offerings and failure of regulation to keep abreast with these changes. The Global Financial Crisis exposed inadequacies of regulation, thus consensus on the need for comprehensive and uniform regulation was made by G-20 member states. Imposing exchange trading, clearing, reporting and capital requirements on the derivatives market are some of the ways of dealing with the problems caused by lax regulatory oversight. In this study, through the comparative analysis of derivatives regulation in South Africa, Brazil, India and Turkey, it was established that emerging countries are taking active steps to implement the G-20 agreement. Uniformity in the core rules was noted, with differences in the supportive legislation. Country specific rules which support the macroeconomic factors that are faced by these countries and the infrastructure available for regulatory execution are used amongst countries. The study concluded that current regulation in emerging countries is accommodative and regulatory differences are in line with economic factors in each country.