Geographic Diversification vs. Financial Contagion: An Analysis Through Capitalism 1.0/2.0, Sustainability, and Stakeholder Theory

This study examines the effects of financial contagion between the stock return of Lehman Brothers and that of other US banks, while assessing the moderating role of geographic diversification. Using a GARCH-DCC model, we analyze the dynamic conditional correlations between four economic regions of the United States (Sun Belt, Northeast, Peripheral Crescent, Interior Diagonal) before and after the Lehman Brothers bankruptcy (2008). Our results reveal significant differences in the propagation of shocks, reflecting varying degrees of financial integration and regional resilience. Beyond quantitative analysis, this article integrates a broader theoretical perspective, mobilizing the concepts of Capitalism 1.0 (short-termism, profit maximization) and Capitalism 2.0 (sustainable, responsible, inclusive). We show that the most resilient regions exhibit characteristics aligned with Capitalism 2.0 and a stronger consideration of stakeholders. Financial sustainability thus emerges as a key factor for systemic stabilization. These insights offer practical implications for regulators, policymakers, and banking practitioners, towards a more resilient and responsible financial framework.