Contents


Preface

This book is about financial crises and it is written at a time when the whole world is facing yet another crisis, a different one this time; one that is related to health, but which is also already affecting the global economy in quite a painful manner. Amidst the grief and pain caused by the Covid-19 pandemic, the world must also find ways to combat its economic consequences. So far, we have seen bold moves by several governments and central banks, which through the combined use of fiscal and monetary policy measures are trying to mitigate the economic effects of Covid-19. The first chapter of this book provides an initial overview of the effects of the pandemic on the global economy and in particular on the financial sector and banks and by doing so provides a "bridge" for the chapters that will follow and which address various aspects of the previous financial crisis (2007-2009).

There is no doubt that the Global Financial Crisis (GFC) of 2007-2009 is an important point of reference in the literature of economic and – in particular – financial crisis; inevitably, this book focuses on this crisis in several dimensions. One of the themes discussed extensively after the GFC was corporate governance and whether failures in this aspect were related and to what extent to the unfolding of the GFC. Chapter 2 addresses this issue by examining the relationship between stock volatility and outside directors and independent directors for a sample of French firms over the period 2006-2012. Results indicate that outside directors and audit size tend to increase the stock return volatility. Moreover, results also indicate that independent directors and ROA have a negative effect on the volatility of stock returns, thus contributing to stabilizing the behavior of the price of stocks.

The third chapter turns its attention to the sources of the Great Recession, and document the following three important findings: firstly, the "net-worth shock" of financial firms had gradually declined prior to a huge decrease of the net worth of non-financial firms; secondly, the net worth shock of non-financial firms accounted for a large proportion of the business cycle after the Great Recession; and finally, the Troubled Asset Relief Program (TARP) would have immediately worked to improve balance sheets of financial institutions. It is worth noting that the chapter also presents evidence that the aforementioned were further worsened by the

Chapter 4 discusses the political and institutional dynamics behind the Global Financial Crisis. More specifically, the chapter focuses on asset securitization, which by reducing lending rates and transaction costs and enhancing liquidity in the market, has been described as the alchemy that "really works". Nonetheless, the chapter points out that this has been questioned in the context of the Global Financial Crisis by presenting a number of factors, which made the alchemy not work very well. More specifically, such factors are subprime lending, executive compensation, and de-regulation, among others, which the chapter discusses both from a

The final chapter of the book presents an interesting case for Turkey and more specifically focuses on the effect of external factors on Turkish short-term interest

collapse of the Lehman Brothers in September 2008.

political and institutional perspective.
