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Case Analysis: Enron; Ethics, Social Responsibility, and Ethical Accounting as Inferior Goods?

Author

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  • Rashid, Muhammad Mustafa

Abstract

In 2001 soon after the Asian Crises of 1997-1998, the Dotcom Bubble, 9/11, the Enron crises triggered a fraud crisis in Wall Street that impacted the market to the core. Since then scandals such as the Lehman Brothers and WorldCom in 2007-2008 and the Great Recession have surpassed it, Enron still remains one of the most important cases of fraudulent accounting. In 2000’s even though the financial industry had become highly regulated, deregulation of the energy industry allowed companies to place bets on future prices. At the peak of the dotcom bubble Enron was named as a star innovator but when the dotcom bubble burst, Enron’s plan to build high speed internet did not flourish and investors started to realize losses. Furthermore, the financial losses of the operations were hid using the market to market accounting technique instead of book value and using special purpose entities to hide debt. The root cause that was identified as a company with a toxic corporate culture focused on officer compensation rather than social responsibility and hence faulty leadership. Is it possible then that; ethical accounting practices, social responsibility and ethics all become inferior goods as income rises in an ‘irrationally exuberant’ era?

Suggested Citation

  • Rashid, Muhammad Mustafa, 2020. "Case Analysis: Enron; Ethics, Social Responsibility, and Ethical Accounting as Inferior Goods?," MPRA Paper 98441, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:98441
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    File URL: https://mpra.ub.uni-muenchen.de/98441/1/MPRA_paper_98441.pdf
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    References listed on IDEAS

    as
    1. Rashid, Muhammad Mustafa, 2019. "A Survey of US and International Financial Regulation Architecture," MPRA Paper 93447, University Library of Munich, Germany.
    2. Muhammad RASHID, 2018. "Successes and Drawbacks of the Federal Reserve and the Impact on Financial Markets," Journal of Advanced Studies in Finance, ASERS Publishing, vol. 9(2), pages 56-59.
    3. Rashid, Muhammad Mustafa, 2019. "St. Thomas Aquinas and the Development of Natural Law in Economic Thought," MPRA Paper 93435, University Library of Munich, Germany.
    4. Rashid, Muhammad Mustafa, 2019. "International Financial Credit Crises; Lessons from Canada," MPRA Paper 94657, University Library of Munich, Germany.
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    Cited by:

    1. Rashid, Muhammad Mustafa, 2017. "King, Fuller and Dworkin on Natural Law and Hard Cases," MPRA Paper 100958, University Library of Munich, Germany, revised 19 May 2020.
    2. Rashid, Muhammad Mustafa, 2019. "Berkeley Blues; Ford Community Corps Partnership: Integrating Environmental Ethic, Bioethics and the Ethics of Emerging Technology into a Comprehensive Leadership Philosophy. A Regional Study, Detroit," MPRA Paper 101867, University Library of Munich, Germany, revised 19 Jun 2020.

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    1. Rashid, Muhammad Mustafa, 2017. "King, Fuller and Dworkin on Natural Law and Hard Cases," MPRA Paper 100958, University Library of Munich, Germany, revised 19 May 2020.
    2. Rashid, Muhammad Mustafa, 2019. "A Survey of US and International Financial Regulation Architecture," MPRA Paper 93447, University Library of Munich, Germany.
    3. Rashid, Muhammad Mustafa, 2019. "Berkeley Blues; Ford Community Corps Partnership: Integrating Environmental Ethic, Bioethics and the Ethics of Emerging Technology into a Comprehensive Leadership Philosophy. A Regional Study, Detroit," MPRA Paper 101867, University Library of Munich, Germany, revised 19 Jun 2020.
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    5. Rashid, Muhammad Mustafa, 2020. "Real Options: Capital Investment Appraisal; Estimating the Market Price of Risk and Application to the Valuation of a New Business," MPRA Paper 101807, University Library of Munich, Germany, revised 19 Jul 2020.

    More about this item

    Keywords

    Keywords: Enron (ENE; ENRN); Dotcom Bubble; Accounting Fraud; Deregulation; Speculation; Corporate Culture; Social Responsibility; Government Intervention; Risk Management; Consumer Behavior; Energy Markets;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management
    • K32 - Law and Economics - - Other Substantive Areas of Law - - - Energy, Environmental, Health, and Safety Law
    • K4 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior
    • M1 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • M4 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting
    • N0 - Economic History - - General

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