Exploring the Manipulation Toolkit: The Failure of Doral Financial Corporation

34 Pages Posted: 28 Jun 2016 Last revised: 24 Apr 2017

See all articles by Ahmed Elnahas

Ahmed Elnahas

University of Texas - Pan American - College of Business Administration - Department of Economics & Finance

Pankaj K. Jain

University of Memphis - Fogelman College of Business and Economics

Thomas H. McInish

University of Memphis - Fogelman College of Business and Economics

Date Written: June 18, 2016

Abstract

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

Elnahas, Ahmed and Jain, Pankaj K. and McInish, Thomas H., Exploring the Manipulation Toolkit: The Failure of Doral Financial Corporation (June 18, 2016). Applied Economics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2800789 or http://dx.doi.org/10.2139/ssrn.2800789

Ahmed Elnahas (Contact Author)

University of Texas - Pan American - College of Business Administration - Department of Economics & Finance ( email )

1201 W. University Drive
Edinburg, TX 78539-2999
United States

Pankaj K. Jain

University of Memphis - Fogelman College of Business and Economics ( email )

Memphis, TN 38152
United States

Thomas H. McInish

University of Memphis - Fogelman College of Business and Economics ( email )

Memphis, TN 38152
United States
901-678-4662 (Phone)
901-678-3006 (Fax)

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