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Effects of the Financial Crises on Firm Investments

Financial Spread Betting is a strategy used by novice traders who do not wish to take risks in their investment portfolio. The paper discusses how financial spread betting departs from the traditional methods of bank financing. It shows that this type of trading is significantly different from traditional finance as it relies on margined trading, leverage and high frequency trading to gain maximum profits. Moreover, the paper discovers that financial spread betting is strongly negative and economically insignificant for firm investment.

In addition, it demonstrates that the expansion of financial spread betting does not take away the risks associated with firm investments. Further, it demonstrates that using spread betting can be highly profitable for firms without extensive experience in the underlying instruments. Finally, it demonstrates that firms can execute financial spread betting using only minimal and transparent channel systems and leverage levels. It thus highlights the importance of firms providing good quality human capital for financial spread betting strategies.

The paper discusses three main issues concerning the relationship between firm investment efficiency and government intervention. The first issue highlights the negative effects of government intervention. The second issue highlights the positive effects of government intervention on firm investment efficiency. The third issue highlights the lack of empirical evidence on the optimal level of government intervention. The research suggests that the optimal level of government intervention is still poorly defined, which leaves a huge gray area in terms of understanding the link between government intervention and firm investment efficiency. Further, the lack of empirical evidence does not allow us to determine whether the level of intervention is effective or not.

The paper next examines the relationship between fiscal policy, firm growth and investment management strategies. The analysis indicates that firms that are able to execute asset allocation with a focus on value add growth are those that stand to benefit the most from the economic stimulus package. Moreover, the growth and development of these firms is likely to be driven by the government if the firms are capable of tapping into the domestic and external economic resources. On the other hand, firms that are inefficient in their approach to asset allocation will suffer from the fiscal policy uncertainties that accompany any government intervention. Finally, it also suggests that the growth and adoption of fiscal policy initiatives will impact the investment management process in the long run. This means that firms will continue to follow the same inefficient policies even after receiving the stimulus package.

The paper then goes on to examine the effect of government intervention on firm investments during the initial period of the crisis period. The analysis indicates that firms will not be able to absorb the losses from the real estate and refinancing crises due to their inability to obtain credit. However, after the crisis period, firms may be able to absorb the losses due to the fall in property and lending rates. This suggests that the initial drop in investment will only be short lived if the Federal Reserve continues to keep interest rates low.

Finally, it examines the effect of the financial crisis on the firms operating within the asset allocation discipline. Although the financial crisis appears to have had little effect on asset allocation decisions, it does imply a shift in allocations to safe securities from equities. Also, it can be seen that firms will need to increase their reliance on short term assets as opposed to long term ones. Moreover, it can be seen that firms will be compelled to make significant increases in the use of derivatives in order to hedge their exposure to financial risk. The paper concludes that the effects of the financial crisis on firm investments are likely to be substantial over time. Given the scale of the response of the US government and the effects of the fiscal stimulus program on firms, it can be seen that support from the political and economic sectors of the administration is unlikely to ease off.