Abstract

http://ssrn.com/abstract=1972354
 
 

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The Role of Accounting in the Financial Crisis: Lessons for the Future


S.P. Kothari


Massachusetts Institute of Technology (MIT) - Sloan School of Management

Rebecca Lester


Stanford Graduate School of Business

December 14, 2011


Abstract:     
The advent of the Great Recession in 2008 was the culmination of a perfect storm of lax regulation, a growing housing bubble, rising popularity of derivatives instruments, and questionable banking practices. In addition to these causes, management incentives, as well as certain US accounting standards, contributed to the financial crisis. We outline the significant effects of these incentive structures, and the role of fair value accounting standards during the crisis, and discuss implications and relevance of these rules to practitioners, standard-setters, and academics.

Number of Pages in PDF File: 31

Keywords: financial crisis, securitization, fair value, incentives

JEL Classification: G10, G20, M41


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Date posted: December 15, 2011  

Suggested Citation

Kothari, S.P. and Lester, Rebecca, The Role of Accounting in the Financial Crisis: Lessons for the Future (December 14, 2011). Available at SSRN: http://ssrn.com/abstract=1972354 or http://dx.doi.org/10.2139/ssrn.1972354

Contact Information

S.P. Kothari (Contact Author)
Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )
E52-325
Cambridge, MA 02142
United States
617-253-0994 (Phone)
617-253-0603 (Fax)
Rebecca Lester
Stanford Graduate School of Business ( email )
518 Memorial Way
Stanford, CA 94305-5015
United States
Feedback to SSRN


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