Influence of 2007-08 Financial Crisis on Corporate Finance

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ACKNOWLEDGEMENT

No words can express my appreciation and gratitude to my research advisor _______ through the course of this research, Professor _____has taught me numerous values that extend well beyond the realm of _________ (Your Subject Name). His emphasis on dedication to work and his valuable and practical insights of life are some of the major highlights of my education at The University _________. To Professor _____, I say with great respect, thank you very much.

DECLARATION

I [type your full first names and surname here], declare that the contents of this dissertation/thesis represent my own unaided work, and that the dissertation/thesis has not previously been submitted for the academic examination towards any qualification. Furthermore, it represents my own opinions and not necessarily those of the University.

Signed __________________ Date _________________

ABSTRACT

Dang, Gary, and Holmstrom (2010, 125) described that the sub-prime mortgage crisis, which had started in the start of the year 2007, had developed into a matured financial crisis at the end of year 2008. The issues in the subprime mortgage loans sector of America had evolved into a wide spread credit crunch, which had swept over several markets of asset all over the world, which had made this financial crisis, the worst global financial crisis after the Great Depression of 1930s. This crisis had made a significant impact on the credit availability and; therefore, an impact on the corporate finance decisions of firms in UK. The current credit crisis had begun in August 2007 because of numerous defaults by costumers on subprime mortgages. This credit crisis has had striking impact on the U.S. financial sector and the world, overall. The consequences of the credit crisis included numerous failures of bank, the bankruptcy of Lehman Brothers on, and the seizure of Washington. In this paper, we had tried to study the impact of the financial crisis on the corporate finance. This dissertation has discovered that the credit crisis did not made a very significant impact on the corporate finance decisions of firms in UK.

TABLE OF CONTENTS

ACKNOWLEDGEMENTII

DECLARATIONIII

ABSTRACTIV

LIST OF TABLESVII

LIST OF FIGURESVIII

CHAPTER 1: INTRODUCTION1

1.1 Background of the study1

1.2 Introduction1

1.3 Problem statement7

1.4 Research objectives7

1.5 Rationale of the study8

CHAPTER 2: LITERATURE REVIEW9

2.1 Concept of Sub-prime Crisis9

2.2 A review of financial crisis of 2007-0812

2.3 The main features15

2.4 Global reaction to the financial crisis17

2.5 Theoretical construct for achieving the research objective18

2.6 The history of money market mutual funds: An important part of the corporate financing decisions of a firm19

2.7 The structure of money market mutual funds21

2.8 Literature gap and research contribution24

CHAPTER 3: METHODOLOGY27

3.1 Outline of quantitative and qualitative approaches to conducting research27

3.2 Quantitative methodology to be applied27

3.3 Empirical methodology applied28

3.4 Difference-in-Differences and Matching30

3.5 Euler Equation Estimation32

3.6 Data37

3.7 Secondary data collection38

3.8 Justification of using mixed method to research38

3.9 Criteria for searching secondary data39

3.10 Keywords39

CHAPTER 4 DISCUSSION AND ANALYSIS40

4.1 Discussion of results40

4.2 Difference-in-Differences43

4.3 Euler equations44

4.4 The impact of financial crisis 2007-08 on money market mutual funds46

4.4.1 The Factors Contributing to the Financial Crisis46

4.4.2 The Market Events during Financial Crisis 2007-200848

CHAPTER 5 ...