international FINANCIAL CRISIS

A Critical Analysis Of The International Regulatory Response To The Global Financial Crisis Area- Are The Proposed Banking Regulation Recurrances Sufficient To Prevent A Recurrance?

Abstract

The FSF introduced new capital requirements in order to strengthen prudential oversight of capital, liquidity and risk management. The FSF's call for timely international implementation of the Basel II capital framework as the starting point for improving capital adequacy is sensible. It is submitted that the United States in particular should stick to the timetable that has since been set for implementation of Basel II. This requires Bank which fall under the Basel II regime to apply the new rules no earlier than April 2009 and no later than April 2011. This study examines how international regulatory structure and conflicts of interest among shareholders under the poor international regulatory system affected firm performance before crisis. Using 50 firms subject to outside auditing, paper finds that firms with low international regulatory concentration show low firm profitability, controlling for firm and industry characteristics. Controlling shareholders expropriated firm resources even when their international regulatory concentration was small. Firms with the high disparity between control rights and international regulatory rights showed low profitability. When the business group transferred resources from the subsidiary to another, they were often wasted, suggesting that “tunneling” occurred. In addition, negative effects of control-international regulatory disparity and internal capital market inefficiency were stronger in publicly traded firms than in privately held ones.

Table of Content

Abstractii

Acknowledgementiv

CHAPTER 01: INTRODUCTION1

Outline of Research1

Aims and Objectives2

Theoretical Framework2

Purpose of Research3

Limitations4

CHAPTER 02: LITERATURE REVIEW5

The Crisis And Corporate Sector Problems6

International regulatory structure of firms7

Determinants of firm profitability10

Control-international regulatory disparity10

Firm organization11

Financial structure11

CHAPTER 03: METHODOLOGY13

Research Design13

Measures15

Data15

Variables16

CHAPTER 04: RESULTS ANALYSIS21

Empirical tests and results22

Impact of controlling shareholders' international regulatory on firm profitability38

Yearly regression results40

Determinants of firm profitability41

Robustness tests43

Time-varying effects of international regulatory concentration44

Nonlinearity of international regulatory effects46

Expropriation in publicly traded firms48

CHAPTER 05: SUMMARY AND DISCUSSION OF RESULTS52

CHAPTER 06: CONCLUSION AND RECOMMENDATION54

REFERENCES56

Acknowledgement

I would like to express my thanks to my advisor, for his suggestions, comments, patience and understanding. Very special thanks to my parents, my father, my mother, my brother and my sister who were continuously supporting me throughout my life and leaving me free in all my decisions. I would also like to thank my colleagues for his technical support whenever I needed. I would like to thank to Department, all the university managers, teachers and students with whom I have worked.

Icertify that the work presented in the dissertation is my own except referenced

Signature..........................................

Date.....................................

CHAPTER 01: INTRODUCTION

Outline of Research

The financial crisis has put the global and European financial stability recurrances to a momentous test. In particular, the crisis has highlighted key features of the financial market landscape, which had been possibly underestimated and need to be addressed by a new structure for financial regulation and supervision. Such features include the increasing relevance of systemic risk stemming from structural developments related to financial integration and financial innovation, as well as the close links between the financial system and the real ...