Management Failures and the 2008 Financial Crisis: Evidence from U.S. Financial Institutions
Year: 2026
Type: article
Abstract: The 2008 financial crisis was a major global economic event that caused widespread financial instability and long-term economic damage. This paper examines how business management failures within United States financial institutions contributed to the development and severity of the crisis. Specifically, it analyzes leadership decision-making, risk management systems, and incentive structures. Many financial institutions increased their exposure to high-risk assets, particularly mortgage-backed securities, while failing to properly evaluate potential consequences. At the same time, risk management systems were often ineffective due to limited authority and reliance on inaccurate financial models. In addition, compensation structures encouraged short-term profit-seeking behavior, which increased overall risk-taking. Using qualitative analysis and secondary sources, this paper identifies how these factors interacted to create systemic instability. The findings suggest that management-related failures played a central role in the crisis. The paper also proposes practical solutions, including stronger corporate governance, improved risk management authority, redesigned incentive systems, and enhanced regulatory oversight. These recommendations aim to reduce the likelihood of similar financial crises in the future and promote long-term financial stability.
Author: Nai Wai Allen, Cheng
Institution: New York University
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: hybrid
OpenAlex ID: W7169830892