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The 2000–2006 housing market bubble conformed to a classic boom–bust scenario that triggered the most serious and costly financial crisis since the Great Depression. The 2008 subprime mortgage collapse leveraged a financial system that privatizes profits and socializes risks. Several factors converge to set up the subprime mortgage market as an easy target for industry insiders to exploit. Enabling legislation expanded the potential pool of borrowers eligible for subprime mortgages and structured incentives to lenders willing to assume the risks. The securitization of subprime mortgages transformed bundles of high-risk loans into mortgage-backed securities that were in demand by domestic and foreign investors. Pressure to edge out competition produced high-risk loans marketed to unqualified borrowers. The final piece in the setup of the subprime lending crisis was a move from an origination model to a distributive model by many financial institutions in the business of lending. We find that the diffusion and totality of these business practices produced a criminogenic opportunity structure for industry insiders to profit at the expense of homebuyers and later investors.

The purpose of this paper is to investigate empirically contagion channels of the 2007 US subprime financial crisis by employing a multivariate GARCH model for four major, international equity markets, namely the USA, EMU, China and Japan.

In this study, contagion channels of the 2007 US subprime financial crisis are investigated empirically by employing a multivariate GARCH model for four major, international equity markets, namely the USA, EMU, China and Japan.

There is empirical evidence of contagion in all markets with the US market through various channels, which have not been discussed in other related studies. Specifically, the empirical results suggest that Japanese and EMU markets have been directly affected from the crisis. However, while China's equity market has been mainly unaffected by the US subprime crisis, has been affected indirectly through Japan. Moreover, the Japanese equity market exhibits positive and significant spillovers effects with China and EMU, revealing an indirect volatility transmission channel of US subprime crisis.

Further research could consider the asymmetric effects on conditional covariance through, for example, asymmetric generalized dynamic conditional correlation models. All under examination markets show evidence of contagion through different channels.

Despite the financial advices for diversification, since the increasing globalization and stock market interdependence throughout the last 15 years, through the US subprime crisis equity investors had fewer opportunities for diversification. From policy makers' perspective, they should carefully examine and uncover possible decoupling strategies to insulate these economies from contagion in future crises.

This study provides useful information to international organizations, such as World Bank and World Trade Organization (WTO) in order to protect markets from contagion during future crises.

A novel finding of this paper is the indirect channel of contagion (i.e. Japanese market) for Chinese market. This indirect channel may help explain why China's equity market performed badly in 2008 after the subprime crisis in the USA emerged.

The purpose of this paper is to shed light on the causes of the 2007‐2009 mortgage crisis, liquidity crisis, stock market volatility in the USA and their spillover effects on the global economy.

The paper critically reviews the 2007‐2009 financial crisis from both academic and practitioners' viewpoints.

The paper explores how the liquidity crisis has evolved with the advent of poorly supervised financial products, especially the credit default swaps and subprime mortgage loans. Further, it analyzes the laxity in regulations that encouraged high financial leverages, shadow banking system and excessive stock market volatility and worsened the recent financial crisis.

The implication of this paper is to understand numerous policy reforms that will help the global capital markets to be more transparent and less vulnerable to systematic risks; the suggested policy reforms may also help to prevent such financial calamities in the future.

This paper seeks to examine the role that regulation and regulatory agencies played in the creating of the subprime mortgage market, and the subsequent crash of the mortgage market. The paper has two goals. First, it seeks to document the degree to which the US housing markets, and the US housing finance market, were regulated prior to the crash. Second, it seeks to show that regulatory bodies set policies which created both incentives and explicit requirements for Fannie Mae and Freddie Mac, as well as depository institutions, to enter the subprime market.

The paper examines the regulatory environment of the subprime market. It uses regulatory filings and other documents as primary sources.

The popular perception that the subprime mortgage market arose because housing finance was largely unregulated is incorrect. In point of fact, the housing finance market was very heavily regulated. Indeed, the paper shows that the creation of the subprime market was a formal goal of the federal government, and that federal regulatory agencies explicitly required participation by the Government Sponsored Enterprises (GSEs).

The paper's primary implication is that incentive conflicts within the US housing finance system significantly contributed to the mortgage crisis. These incentive conflicts were not just within private firms, but also extend to the GSEs and regulatory agencies. Regulatory agencies not only failed to anticipate the crisis; they actively encouraged the policies which created it. As a result, the primary focus of reform efforts should be on identifying and eliminating such conflicts.

This study aims to measure impact of several firm-specific factors on alternative measures of leverage. The authors also aim to study impact of the subprime crisis on such associations.

The authors utilized an unbalanced panel data of 973 firm-year observations on 47 UK listed non-financial firms for the years 1990–2019. Book-based and market-based long-term and total leverage measures have been used as explained variables. The explanatory variables are profitability, size, two measures of growth, asset tangibility, non-debt tax shields, firm age and product uniqueness. Fixed effect and random effect models with clustered robust standard errors have been utilized for data analysis. To find the effect of subprime crisis, original dataset was split to create pre-crisis and post-crisis datasets.

The authors find that profitability significantly reduces leverage while firms having more tangible assets use significantly more debt in capital structure. Firm size and non-debt tax shield have statistically insignificant positive impact on leverage. Having more unique products reduces use of external debt, albeit insignificantly. Growth, when measured as market-to-book ratio, has inconsistent impact, whereas capital expenditure insignificantly reduces leverage. Age is found to be an insignificant predictor of leverage. After the subprime crisis, firms started relying more on internal fund instead of external debt, more particularly short-term debt. Having more collateral is gradually becoming more important for availing external debt.

Data limitations restrict generalization of the findings.

This is one of the pioneering attempts to show how subprime crisis altered the theoretical domain of capital structure research in the UK.

We investigate whether or not the effects of the subprime financial crisis on 12 Asian economies are similar to those of the Asian financial crisis by examining volatility spillovers and time-varying correlation between the US and Asian stock markets. After pretesting volatility causality and constancy of correlation, we estimate an appropriate smooth-transition correlation VAR-GARCH model for each Asian stock market. First, the empirical evidence indicates stark differences in stock market linkages between the two crises. The volatility causality comes from the crises-originating country. Volatility in Asian stock markets Granger-caused volatility in the US market during the Asian crisis, whereas volatility in the US stock market Granger-caused volatility in Asian stock markets during the subprime crisis. Second, decreased correlations during the period of financial turmoil were observed, especially during the Asian financial crisis. Third, the estimated points of transition in the correlation are indicative of market participants’ awareness of the ensuing stock market crashes in July 1997 and in September 2008.

Subprime mortgage was a kind of high-risk and high-interest lending, especially targeted at low-income and minority borrowers. The majority of subprime mortgage loans were made to non-affluent, low-income and poor borrowers who were previously unable to buy properties and might have poor credit histories (Pitcoff, 2003; Schwarcz, 2009). Why did mortgage lenders compromise their lending standards and dare to take obviously huge risks in mortgage lending? It is clear that the origin of the aggressive subprime mortgage practices were linked to the US Government's policy for increasing national homeownership and encouraging lenders to provide mortgage loans and other credits to low-income and minority borrowers, as a specific stakeholder group.

This paper aims to compare the effect of ownership on firm performances in the 1997 and 2008 financial crises. More specifically, it investigates the effect of cash flow rights, control rights and cash flow rights leverage on firm performance. Two conditions motivated the study. First, the 2008 financial crisis happened quickly, so it was endogenous for firms. This setting is ideal to deal with endogeneity problems in a study that involves ownership and performance. Second, during the 2000s, awareness and implementation of corporate governance increased significantly. The authors believe that the markets learn these changes and incorporate them into prices, as suggested by an efficient market hypothesis.

The paper investigates and compares the effect of ownership structure on firm performance in the 2008 subprime crisis period to that in the 1997 financial crisis. Both crises happen unexpectedly, so the authors can expect that the crises are exogenous to firms. The authors use cash flow rights, control rights and cash flow right leverage for the ownership structure dimension. They also study time-series data to investigate the effect of ownership on a firm’s value.

The study finds that cash flow right and cash flow right leverage did not affect stock performance during the subprime crisis of 2008. It also finds that cash flow right leverage and cash flow right affected stock performance during the financial crisis of 1997. The study attributes this finding to the learning process and improvement of corporate governance during the period of the 2000s. Using time-series data, it finds that cash flow rights positively affect firm performance, suggesting an alignment effect. Ownership concentration improves firm performance. When the study split its sample, it found that the effect ownership on firms’ value is stronger for large firms.

The study’s main limitation is that it does not test directly the learning process hypothesis. The study contributes to the current literature by presenting more recent evidence on the effect of ownership structure on firm performance in a developing country. The authors argue that markets learn the improvement of corporate governance and incorporate this development into prices. Extending this research to other markets will provide confirmation whether the learning process is an international phenomenon.

The awareness and implementation of corporate governance should be maintained at least at this level. The positive relationship between ownership concentration and firm performance suggests that concentrated ownership performs monitoring more effectively. Investors should pay attention to ownership concentration.

The finding that prices already reflect corporate governance may suggest that market is monitoring this issue. This seems to be a good finding. Markets can be expected to discipline companies in the implementation of corporate governance. The awareness and implementation of corporate governance should be maintained at least at the current level.

The study contributes to the current literature by presenting additional evidence on the effect of ownership (using cash flow rights, control rights and cash flow right leverage) on firms’ performance in a more recent period and in a developing country. This period is characterized by a significant increase in awareness and the implementation of good corporate governance.

The purpose of this paper is to examine whether China is still a passive price taker from the US soybean futures, or instead domestic futures market has developed certain degrees of pricing power through time. The finding helps to identify the importance of China soybean futures in the perspective of portfolio selection for international futures traders. If China soybean futures market is no longer a price taker after the subprime crisis, traders need to include it as a separate category in their portfolio.

This paper uses exponential generalized autoregressive conditional heteroskedasticity-generalized error distribution (EGARCH-GED) and generalized autoregressive conditional heteroskedasticity-generalized error distribution (GARCH-GED) models to test spillover effects between Dalian Commodity Exchange (DCE) and Chicago Board of Trade (CBOT) soybean futures. The authors divide daily samples into three subperiods based on the subprime crisis. Three research questions – whether China is still the price taker, the importance of Chinese soybean futures in international futures portfolio selection, and the influences of subprime crisis on soybean futures volatility relationship – are examined by comparing estimation results through time and different contracts.

The spillover effect from CBOT soybean futures to DCE No. 1 soybean futures becomes weaker through time. China is no longer a soybean futures price taker after the subprime crisis. The authors also find the shocks of bearish news on DCE soybeans are greater than those of bullish news. Potential volatility of DCE in long positions is bigger than that in short positions.

China is the largest soybean importer. DCE is a very important futures market for non-genetically modified soybeans. It is necessary for both international and domestic futures traders to understand the changes in international soybean futures price relationship and take corresponding strategies. It is also important for market to realize that DCE soybean futures are to a less degree price taker after the subprime crisis.

The paper applies EGARCH-GED and GARCH-GED models to identify changes in spillover effects before, during, and after the subprime crisis. Different from other studies, this paper finds after the subprime crisis, China is no longer the soybean futures price taker. This paper also compares the spillover effects of non-genetically modified soybean futures (No. 1 soybean futures) with genetically modified soybean futures (No. 2 soybean futures).

This chapter proposes a comparative analysis of the monetary policies undertaken by the Federal Reserve Board and the European Central Bank after the 2008 subprime crisis. We point out the twin nature of the financial crises in Europe in comparison with the US crises: in addition to the role of bank funding, the euro area countries have also experienced a structural problem of balance of payment disequilibria. This explains why in the early stages of the subprime crisis, the Fed has succeeded in tackling the illiquidity problems facing the banking sector, while the ECB did not. The Fed could then focus on tackling the recession in the real sector by adopting quantitative easing policies to exert downward pressure on the long-term interest-rate. In the euro area quantitative easing policies came later, in 2013. Even the forward guidance policies have been different between the two central banks. Unlike the ECB, the Fed has gone through diverse forward guidance policies: qualitative, calendar-based, and state-contingent. The chapter proposes a new survey of the monetary policies after the subprime crisis by comparing two strategies in different contexts: the United States and the euro area.