Advances in Economics, Management and Political Sciences

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Proceedings of the 2nd International Conference on Financial Technology and Business Analysis

Series Vol. 61 , 28 December 2023


Open Access | Article

Too Big To Fall: Bankruptcy of Lehman Brothers Holdings Inc. in 2008

Sijie Yang * 1
1 Faculty of Business and Management, Beijing Normal University-Hong Kong Baptist University United International College, Zhuhai, Guangdong Province, China, 519000

* Author to whom correspondence should be addressed.

Advances in Economics, Management and Political Sciences, Vol. 61, 64-70
Published 28 December 2023. © 2023 The Author(s). Published by EWA Publishing
This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
Citation Sijie Yang. Too Big To Fall: Bankruptcy of Lehman Brothers Holdings Inc. in 2008. AEMPS (2023) Vol. 61: 64-70. DOI: 10.54254/2754-1169/61/20230845.

Abstract

The research background is Lehman Brothers Holdings Inc. (Lehman Bro.) sending Chapter 11 bankruptcy protection application due to extremely high leverage and liquidity lacking towards New York Court in the Subprime Lending Crisis, 2008. This research illustrates the event’s economic background, three critical factors to final bankruptcy and practical solutions from Macro and Micro perspectives. This research adopts the typical case analysis method and concludes that mismatching capital structure with high insolvency risk, not be acquired or purchased for its qualified and inferior assets by other financial institutions or provided timely adequate capital support by American Federal Reserves, agency problem as conflicts of interests between the chief executive officer and his employment's shareholders in risk preference, and finally inappropriate accounting policies without complete disclosure of misconducting Repo105 to reduce debt-equity ratio for external investors are essential reasons account for Lehman Bro. Bankruptcy in 2008 with concrete illustrations in this case analysis research papers.

Keywords

Lehman Brothers Holdings Inc., Subprime Lending Crisis, Bankruptcy, Corporate Governance, Agency Problem

References

1. Qi Jue. (2023, January 24th). Too Big to Fail: The Fall of Lehman Brothers. Zhihu. https://zhuanlan.zhihu.com/p/600805216.

2. Cao Y. (2009). Financial Bailouts and Market Fundamentalism. Chinese Financier (07),131-133. doi:10.19294/j.cnki.cn11-4799/f.2009.07.040.

3. Yu Yongding. (2008). American subprime crisis: Background, causes and development. Contemporary Asia Pacific, pp. 5, 14–32.

4. Li Q. (2009). Another Perspective for Understanding Corporate Failure and Economic Crisis: A Review of Hu Jingsheng's Convex Incentives: Research on Stock Options-Related Issues. Dong yue lun cong, 7, 7. 191-191.

5. Wang Y. (2009). Optimal allocation of managers' stock options. Zhejiang social sciences (12), 17+10-125 doi: 10.14167 / j.z JSS. 2009.12.019.

6. Ren Chuanpu. (2012). Equity incentive system from the bankruptcy of Lehman Brothers. China Economic and Trade Herald, pp. 20, 48–49.

7. Xiong Y. &Hao J. (2008, October 18th). Here is how Lehman Brothers got their high salaries. Chinesetimes.net.cn. https://www.chinatimes.net.cn/article/699.html.

8. Demos, T., & Braithwaite, T. (2012). Mixed ruling in Lehman-JPMorgan dispute. FT.com.

9. Wang Y. (2009). Optimal allocation of managers' stock options. Zhejiang social sciences (12), 17+10-125 doi: 10.14167 / j.z JSS. 2009.12.019.

10. Chen S. &Chen Y. (2012). Analysis of the audit of Lehman Brothers Bankruptcy. Commercial Research, 8, 1-7. https://doi.org/10.3969/j.issn.1001-148X.2012.08.001

Data Availability

The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.

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Volume Title
Proceedings of the 2nd International Conference on Financial Technology and Business Analysis
ISBN (Print)
978-1-83558-223-7
ISBN (Online)
978-1-83558-224-4
Published Date
28 December 2023
Series
Advances in Economics, Management and Political Sciences
ISSN (Print)
2754-1169
ISSN (Online)
2754-1177
DOI
10.54254/2754-1169/61/20230845
Copyright
© 2023 The Author(s)
Open Access
This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited

Copyright © 2023 EWA Publishing. Unless Otherwise Stated