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Lending, Investments and the Financial Crisis addresses the ways in which the strategies of institutional investors have been impacted by the global financial crisis.



1. How Difficult Is It to Raise Money in Turbulent Times?

Banks finance themselves with a variety of sources, with different maturities and credit risk characteristics. Heavy reliance on short-term wholesale funding in the years preceding the financial crisis, a distinctive characteristic of the Originate to Distribute (OTD) business model in banking, turned out to be a source of subsequent problems.
Paola Bongini, Arturo Patarnello, Matteo Pelagatti, Monica Rossolini

2. The ‘Wisdom of the Crowd’ as an Antidote to the Credit Crunch: A Preliminary Analysis of Crowdfunding

Crowdfunding is a very recent financial (and social) phenomenon all over the world. When we met at the beginning of our research effort, analysing the different topics and issues arising with reference to crowdfunding, we decided that an interdisciplinary and pluralistic approach was the best path to understanding the phenomenon from a theoretical and methodological point of view. The literature about crowdfunding has very few academic contributions at the international level, and we find more practitioners’ and institutional attention than academicians’ [see Sections 2 and 3]. Putting together banking and finance, economics and statistics’ perspectives and tools is, in our opinion, a good way to develop the research about crowd-funding in a deeper mood.
Daniele Previati, Giuseppe Galloppo, Andrea Salustri

3. Financing Firms’ Networks: The Italian Case

The recent financial crisis has highlighted that enterprises, in particular small- and medium-sized enterprises (SMEs), need to become more competitive, to expand internationally and to have access to new funding channels.
Elisa Giaretta, Giusy Chesini

4. The Role of Loan Dynamics and Structure for CEE Economic Growth

The key responsibility of the banking sector is to provide credit to consumers, corporations and small firms. In case of firms, bank credit is an essential part of financing investment activities, particularly within the European financial model. Households use debt primarily to finance consumer spending and mortgages, but for firms an external source of finance is essential to their investments, which in the long run is fundamental to the GDP growth. However, excessive leverage can also be harmful: Cecchetti et al. (2011), using OECD data, found that corporate debt above 90 per cent of GDP and household debt above 85 per cent of GDP constitute a financial burden which may hamper a country’s economic growth. In the light of the 2007–09 financial crisis, it has become particularly important to understand how banks make loans and to establish what are the factors influencing credit structure and composition.
Ewa Miklaszewska, Katarzyna Mikołajczyk

5. China’s Shadow Banking System and Its Lurking Credit Crunch: Causes and Policy Options

In June 2013 the Chinese government and thereby the People’s Bank of China (PBC) shocked the world markets by refusing to lend out money any further to Chinese banks, therefore causing turmoil on the Chinese interbank market. This so-called Shanghai interbank offered rate (Shibor) crisis made it clear that the PBC was not willing to provide unlimited liquidity after China’s money supply far outpaced its GDP growth for more than a decade. Although the government has set a new annual GDP target at 7.5 per cent over the period 2011–15, it keeps investing in order to hold the GDP growth, and as a result China’s debt burden is rising — not just the absolute amount of debt in the economy, but also the annual cost of servicing that debt relative to its GDP. After the credit crisis in 2007–08, the aggressive stimulus measures to boost economic activity required the authorities to relax controls on local government spending programs, and since then China’s credit and debt ratio expanded much faster than its GDP growth. Currently China seems to be in a similar predicament to several of the developed economies prior to 2008, since too much credit has been created too quickly and too much money has been poured into investments that are unlikely to generate sufficient cash flows to pay off the debt. China’s stock of credit has soared to more than 200 per cent of GDP, having risen steeply over the past five years.
René W. H. van der Linden

6. An Index of Bank Liquidity Creation: An Application to the Banking Systems of the Eurozone and the Liquidity Policy of the ECB during the Euro Crisis

The main function of banks is maturity transformation. By performing this function banks create liquidity. They lend illiquid loans to borrowers of funds, and in the face of these they emit liabilities which may be withdrawn at any time at par value (Bryant, 1980; Diamond and Dybvig, 1983; Holmstrom and Tirole, 1998).
Pierluigi Morelli, Giovanni B. Pittaluga, Elena Seghezza

7. The Performance of Listed European Innovative Firms

European venture capital has gained increasing interest in the latest years by academics, practitioners and policy makers: its relevance in this area has been growing, and firms located in European countries have attracted a substantial share of the investments. Traditionally the literature identifies venture capital (VC) as the form of investment in start-up and growth companies, which is particularly fitted to overcome the asymmetries of information characterizing new businesses and firms which are living a series of changes (Gompers, 1995; Brav and Gompers, 1997). VC is also able to boost the performance of the target companies thanks to its value-added services, in terms both of sales growth and employment (Grilli and Murtinu, 2014; Paglia and Harjoto, 2014) and of stock performance (Bessler and Seim, 2012), or with reference to corporate governance (Farag et al., 2014), although the real contribution of VC might depend on the context (Rosenbusch et al., 2013).
Luisa Anderloni, Alessandra Tanda

8. Investment Strategies of Institutional Investors: An International Comparison of Sovereign Pension and Social Security Reserve Funds

In recent years Sovereign Wealth Funds (SWFs) have increased their numbers and their global importance in terms of assets under management. From the peak of the financial crisis, both the banking sector and the securities industry have suffered severe adverse effects on profitability growth and financial stability. At the same time, the number and size of SWFs soared: at year-end 2012, at least 65 investment vehicles were active with total assets under management in excess of 5 trillion USD (Sovereign Wealth Fund Institute, 2013).
Alberto Dreassi, Stefano Miani, Andrea Paltrinieri


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