F eb 2 01 0 The Lehman Brothers Effect and Bankruptcy Cascades ∗

Oral Testimony of Luigi Zingales on "Causes and Effects of the Lehman Brothers Bankruptcy” Before the Committee on Oversight and Government Reform

Investors’ Horizons and the Amplification of Market Shocks

After negative shocks, investors with short trading horizons are inclined or forced to sell their holdings to a larger extent than investors with longer trading horizons. This may amplify the effects of market-wide shocks on stock prices. We test the relevance of this mechanism by exploiting the negative shock caused by Lehman Brothers’ bankruptcy in September 2008. Consistent with our conjectu...

Corporate liquidity and the contingent nature of bank credit lines: Evidence on the costs and consequences of bank default

Article history: Received 16 June 2014 Received in revised form 24 September 2014 Accepted 2 October 2014 Available online 13 October 2014 I study the impact of Lehman Brothers' bankruptcy and resultant inability to honor its obligations as a lender under committed credit lines. Firms that lost access to a credit line committed by Lehman Brothers experienced abnormal stock returns of−3%, on ave...

Predicting Bankruptcy with Robust Logistic Regression

Using financial ratio data from 2006 and 2007, this study uses a three-fold cross validation scheme to compare the classification and prediction of bankrupt firms by robust logistic regression with the Bianco and Yohai (BY) estimator versus maximum likelihood (ML) logistic regression. With both the 2006 and 2007 data, BY robust logistic regression improves both the classification of bankrupt fi...

Information dissipation as an early-warning signal for the Lehman Brothers collapse in financial time series

In financial markets, participants locally optimize their profit which can result in a globally unstable state leading to a catastrophic change. The largest crash in the past decades is the bankruptcy of Lehman Brothers which was followed by a trust-based crisis between banks due to high-risk trading in complex products. We introduce information dissipation length (IDL) as a leading indicator o...