The Collapse of Lehman Brothers – How it Happened
Swiss Management Center (SMC) University
August 15, 2011
The fifth largest investment bank in the world, Lehman Brothers Holdings Incorporated (LBHI) in 2008 filed for the largest ever bankruptcy in the history of the United States (Fernando, May and Megginson, 2011). A year to filing for bankruptcy, LBHI reported revenues of about $60 billion and earnings in excess of $4 billion for the financial year 2007. The stock price of LBHI plummeted from a high of $65.73 in January 2008 to a low of less than $4 within eight months. While the collapse of Lehman Brothers Holding Incorporated seems unbelievable, the business strategy adopted by LBHI and breach of internal risk policies prior to its fall especially from late 2007 showed an inevitable phenomenon. This paper examines the Lehman Brother’s bankruptcy report and other news sources regarding the financial implosion to determine how such an investment company could fail and almost bring about systemic financial market collapse.
Number of Pages in PDF File: 20
Keywords: Corporate Governance, Commercial Banks, Investment Banks, Banking Competition, Subprime Crisisworking papers series
Date posted: September 3, 2011 ; Last revised: October 4, 2011
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