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.

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TABLE OF CONTENTS

ACKNOWLEDGEMENTII

DECLARATIONIII

CHAPTER 1: INTRODUCTION1

1.1 Background of the study1

1.2 Introduction1

1.3 Problem statement1

1.4 Research objectives2

1.5 Rationale of the study2

CHAPTER 2: LITERATURE REVIEW3

2.1 A review of financial crisis of 2007-083

2.2 Theoretical construct for achieving the research objective4

CHAPTER 3: METHODOLOGY6

3.1 Outline of quantitative and qualitative approaches to conducting research6

3.2 Quantitative methodology to be applied6

REFERENCES7

BIBLIOGRAPHY9

CHAPTER 1: INTRODUCTION

1.1 Background of the study

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.

1.2 Introduction

The lending standards and performance of the subprime mortgage sector before the 2007 global financial crisis have been widely studied in the loan level (Covitz, Liang and Suarez 2009, 58). There study focus on whether securitization decreases lending standards, especially in the subprime mortgage segment.

Coval, Jurek, and Stafford (2009, 13) noted that the evidence of a decline in lending standards is only a piece of the puzzle, and the argument must be that if this occurs, it was not reflected in the structure of the mortgage-backed security (MBS). Lending behaviour is the starting point of the securitization process. The lending behaviours of subprime originators in the primary mortgage market cannot fully explain why one segment of the fixed income market was the trigger of the worst financial crisis since the Great Depression. For example, suppose more protection for the senior tranche was inserted in the design of subprime MBS. Then it is difficult to conclude that the subprime MBS market would have deteriorated as much as the subprime mortgage market. Therefore, it is important to investigate subprime MBSs themselves, which are the next link from the subprime mortgage to the final investor, for understanding the effect of securitization on the financial ...