Exploring the Manipulation Toolkit: The Failure of Doral Financial Corporation
34 Pages Posted: 28 Jun 2016 Last revised: 24 Apr 2017
Date Written: June 18, 2016
TThe 2015 bankruptcy of Doral Financial Corporation, once “the best” U.S. bank according to U.S. Banker, is the largest since April 2010. The bankruptcy concludes years of management manipulation and efforts to recover. SEC investigation revealed fraud related to Doral’s valuation of interest only strips (IOs). We show that Doral management’s misconduct also includes reckless hiring, over investing, insiders trading, and opportunistic stock splits. Investigating the full range of Doral management’s misconduct reveals new tactics that managers use to pool with good firms and aids our understanding of the economic impact of managerial misconduct.
Keywords: Earnings Management, Fraud, Restatement, Bankruptcy
JEL Classification: G14, G34, G35, M41
Suggested Citation: Suggested Citation