The Theoretical Framework Of The Study And Is Divided Into Four Main Sections

10335 WordsJun 21, 201542 Pages
Chapter 2 - Literature Review 2.1 Introduction This chapter discusses the theoretical framework of the study and is divided into four main sections. The first section describes the recent financial crisis or global economic recession. Section two reviews any similarities between the recent crisis and previous crises. Section three explores the measures taken by governments to prevent a reoccurrence of a financial crisis Section four discusses FDI and mergers and acquisitions. 2.2 Financial Crisis/Global Economic Recession As defined by Eichengreen and Portes (1987) a financial crisis tends to be disruptions within financial markets and are characterised by falling asset prices and bankruptcy/liquidation among debtors which spread through the financial system, completely disrupting the markets capacity to allocate capital. It is clear that the crisis had multiple causes such as the financiers themselves especially those who claimed to have found a way to expel risk where in fact they had only lost track of it. Regulators and bankers are also to bear blame because they tolerated this recklessness. The macroeconomic backdrop was very important as years of low inflation and stable growth nurtured risk-taking. Some research suggests that European banks should take blame as they borrowed greedily in American money markets pre-crisis and used the funds to buy dodgy securities. All these factors together played a major role in the unravelling of the recent financial crisis
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