Procyclical Behavior of Institutional Investors During the Recent Financial Crisis: Causes, Impacts, and Challenges

Papaioannou, Michael G.; Pihlman, Jukka; Hoorn, Han; Everaert, Luc

doi:10.5089/9781484336083.001

Cited by 36 publications

(46 citation statements)

References 44 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…SWFs invested in equities experienced large losses from the sharp decline in equity markets. However, they recovered most of the losses in the subsequent years by demonstrating their willingness to be long-term investors and riding out the financial turmoil (IMF 2011, andPapaioannou &others, 2013).…”

Section: Literature Reviewmentioning

confidence: 99%

Sovereign Wealth Fund Investments and Firm Value

Ngoc¹

2015

IJEF

View full text Add to dashboard Cite

This research aims to analyze the impact of Sovereign Wealth Fund (SWF) investments on the values of companies in which they invest. We attempt to provide evidences of the effects of SWF investment activities by examining the short-term impact of SWF investments on the performance of the companies. In order to quantify the valuation effects of SWF investments, we collect data on equity investments for each SWF and we use the event study methodology to estimate abnormal returns to the shares around the times that news of the transactions of SWFs becomes publicly available. The sample consists of 61 investments by 11 important SWFs from around the world (China, Singapore, United Arab Emirates, Russia, France etc.) during the period 2003 to 2014. We find that the anouncement effect of SWF investments in the listed companies is positive and the level of transparency of SWFs influence the positive impact of SWF investments on the performance of those companies in which they invest.In this paper, firstly, a literature review summarizes the previous studies about the market reaction to announcements of investments by SWFs. Next, we present and explain the methodology and the data of our research. Finally, the empirical results and conclusions regarding the impact of SWF investments on the performance of the companies are clearly revealed. www.ccsenet.org/ijef

show abstract

Section: Literature Reviewmentioning

confidence: 99%

Sovereign Wealth Fund Investments and Firm Value

Ngoc¹

2015

IJEF

View full text Add to dashboard Cite

show abstract

“…A recent study from Papaioannou et al (2013) classifies institutional investors' main characteristics in four groups: (i) short-term liquidity needs, (ii) regulatory constraints, (iii) peer pressure and (iv) financial stability responsibilities. For instance, pension funds have relatively low shortterm liquidity needs due to their long-term liability structure under high regulatory constraints.…”

Section: Part IV Corporate Governance Taxonomy Of Institutional Invementioning

confidence: 99%

Institutional Investors as Owners

Çelik

Isaksson

2013

OECD Corporate Governance Working Papers

View full text Add to dashboard Cite

“…A downward spiral of the quality of the securities backing these instruments caused several rating downgrades of these instruments and precipitated chaos within globally interconnected financial markets. Further, the procyclical nature of these markets, albeit contributing significantly to the pre-crisis market euphoria, fuelled one of the biggest busts in financial history (Bank for International Settlements 2008; Papaioannou et al 2013). …”

Section: Introductionmentioning

confidence: 99%

Procyclicality in tradeable credit risk: Consequences for South Africa

Visser

Vuuren

2018

SAJEMS

View full text Add to dashboard Cite

Background: Tradeable credit assets are vulnerable to two varieties of credit risk: default risk (which manifests itself as a binary outcome) and spread risk (which arises as spreads change continuously). Current (2017) regulatory credit risk rules require banks to hold capital for both these risks. Aggregating these capital amounts is non-trivial. Aim: The aim was to implement the bubble value at risk (buVaR) approach, proposed by Wong (2011) to overcome the risk aggregation problem. This method accounts for diversification and for procyclicality and operates by inflating the positive side of the underlying return distribution, in direct proportion to prevailing credit spread levels (usually liquid credit default swap spreads). Setting: The principal setting for the study was the South African credit market which represents a developing market. Previous work by Wong (2011) focussed only on developed markets. Methods: Using South African data, closed form solutions were derived for free parameters of Wong’s formulation, and the relationship between the spread level and the response function was developed and calibrated. Results: The results indicate that the original calibrations and assumptions made by Wong (2011) would result in excessive capital requirement for South African banks. Estimates obtained from this work suggest further calibration is required to cover the unique features of the South African milieu. Considerable differences compared with other markets were also found. Conclusion: The application of buVaR to South African government bond credit default swaps spreads highlighted the metric’s countercyclical properties that would potentially have countered bubble developments had they been implemented during the credit crisis of 2008/2009. Regulatory authorities should take this important metric into account when allocating South African bank’s credit risk capital.

show abstract

Procyclical Behavior of Institutional Investors During the Recent Financial Crisis: Causes, Impacts, and Challenges

Cited by 36 publications

References 44 publications

Sovereign Wealth Fund Investments and Firm Value

Sovereign Wealth Fund Investments and Firm Value

Institutional Investors as Owners

Procyclicality in tradeable credit risk: Consequences for South Africa

Contact Info

Product

Resources

About