Impact of regulation after the financial crisis

Adamu, Muhammed Shamsuddeen (2021) Impact of regulation after the financial crisis. PhD thesis, University of Glasgow.

Abstract

This thesis comprises five Chapters on the impact of regulation after the crisis of 2007 in the UK and US. The analysis considered different aspects of the crisis as reflected in the three main chapters of this thesis that includes the impact of regulation on the probability of a financial crisis, The impact of regulation on systemic risk, and contagion, interdependence, and the impact of regulation. Chapter 1 introduces the main themes within the thesis. It provides an outline, scope, and brief discussion of thesis contributions.

Chapter 2 starts by providing the thesis’s theoretical background after setting out key themes (e.g. early warning models, theories of regulation and banking regulation) that form the research basis. The chapter analysed the impact of regulation on the probability of a crisis, i.e. it assessed the extent that recent regulation has reduced the chances of another crisis occurring. We employ an early warning signal method – Logit model and Bayesian model average to establish this impact. Our results have shown recent regulation has reduced the probability of financial crisis both in the UK and the US and concluded with the proposal of adding Basel III liquidity thresholds variables to the ‘early warning signal’ literature.

Chapter 3 examines the interaction between systemic risk and bank¬level variables that were the target of regulation after the crisis. The analysis shows the level of impact that some of the Basel III (an international regulation) and other national regulations (e.g. Ring Fencing in the UK) are having on systemic risk. We employed ∆CoVaR as the proxy for systemic risk and estimated CoVaR using quantile regression and the Garch model before applying Kupiec (1995), Christoffersen and Pelletier (2004), and Lopez (1999) tests to establish the accuracy of our results. Our result shows that the variables that capture Basel III regulation have a significant impact in reducing systemic risk. In contrast, UK¬specific regulation indicates little to no impact in reducing systemic risk. Chapter 4 investigate the impact regulation has had on CDS indexes. In so doing, we established the existence of contagion before the implementation of regulation and Interdependence after that. We then employed Regime dependent Impulse Response Functions to show the indexes that react most to shocks from the system. Finally, chapter 5 concludes and summarises the thesis and provides a discussion of policy implications.

• Item Type: Thesis (PhD)
• Qualification Level: Doctoral
• Subjects: H Social Sciences > HG Finance
• Colleges/Schools: College of Social Sciences > Adam Smith Business School > Accounting and Finance
• Supervisor's Name: Sermpinis, Prof. Georgios, Stasinakis, Dr. Charalampos and Sogiakas, Prof. Vasilios
• Date of Award: 2021
• Depositing User: Theses Team
• Unique ID: glathesis:2021-82459
• Copyright: Copyright of this thesis is held by the author.
• Date Deposited: 23 Sep 2021 14:57
• Last Modified: 23 Sep 2021 15:00
• Thesis DOI: 10.5525/gla.thesis.82459
• URI: https://theses.gla.ac.uk/id/eprint/82459