Causes and Effects of the Lehman Brothers Bankruptcy” University of Chicago Graduate School of Business, National Bureau of Economic Research and Center for Economic Policy research

Abstract

I argue that the demise of Lehman Brothers is the result of its very aggressive leverage policy in the context of a major financial crisis. The roots of this crisis have to be found in bad regulation, lack of transparency, and market complacency brought about by several years of positive returns. Lehman’s bankruptcy lead to a reassessment of the risk, in particular in the market for credit default swaps