ECONOMICS

Corporate Failure Enron

Corporate Failure Enron

Introduction

Enron was one of the largest energy companies, in 2001 Enron was ranked number seven by fortune magazine, and Enron had the market capitalization of around five hundred largest corporations in United States. Enron had witnessed swift and sudden collapse in their market value, due to this value change of the energy giant there have been many consequences, which impacted all stakeholders of Enron including their creditor's employees and auditors. The Enron failure had a significant impact on Economy of country, which impacted the many investors and businesses. In my essay I will examine the social and economic impact of Enron, and highlight the key issues which became the reasons for corporate failure of Enron. In this essay I have analyzed Enron organizational corporate culture as it was the leading factor for bringing down the corporation.

Before the Enron failure or collapse many institutions and individuals in United States, including US congress representatives were favoring the deregulation of businesses. Whereas, the losses of Enron failure, provided momentum to debate of regulation vs. deregulation, it has become obvious that failure of Enron has resulted in some serious consequences, which have impacted political, social and economical context of country. Prior to the stock market crash of 1929, and great economic depression, the support from government was very little for regulating the securities markets. Many institutions and individuals had a significant financial loss due to the stock market crash, this brought up an economic turmoil resulting in the declining confidence level of people in security market. In order to regain the confidence level and faith of people in capital markets, congress took some initiatives, which includes the Securities Act of 1933 and securities exchange act 1934. (STERLING, T. F. 2002 Pp. 145-150)

The core purpose of these laws to regain the confidence level of United States capital market investors, by providing more developed structure, in order to provide structure to the capital market, a regulatory body was designed which can help in making sure that market works transparently, the body was named Securities and exchange commission (SEC). The primary of this regulatory body was to make sure that investors are protected, and maintain the integrity of securities markets.

Discussion

Information regarding the Enron suggests that, corporation made its money with the use of some unethical accounting treatments, including unregulated private partnerships, set off books and hiding off revenues in order to show the inflated revenues, on the other hand rating of bond is concerned the Executives of Enron were successful in keeping bond rating agencies happy, this was achieved by the use of shell game, with constant refusal to analysts for answering the question regarding the source of money. (CRUVER, B. 2002 Pp. 81-90)Whereas, auditing firm is concerned they turned themselves blind eye and did not questioned about the accounting practices as they do not wanted to lose their lucrative consulting fees they were receiving from Enron.

Project Financing of Independent Power Projects

In 1980s, Enron used the project financing method for financing the independent ...