Governance and Intermediation Problems in Capital Markets: Evidence from the Fall of Enron

52 Pages Posted: 15 Oct 2002

See all articles by Paul M. Healy

Paul M. Healy

Harvard Business School; National Bureau of Economic Research (NBER)

Krishna Palepu

Harvard University - Harvard Business School; Harvard University - David Rockefeller Center for Latin American Research; Harvard Business Review; NBER; International Academy of Management

Date Written: August 15, 2002

Abstract

The financial reporting and disclosure problems at Enron, as well as the high market valuations for its stock raise troubling questions about the performance of capital market intermediaries, regulators and governance experts whose are supposed to ensure the effective functioning of the stock market. This paper examines the functions of key capital market intermediaries and analyzes how their own governance and incentive problems may have contributed to Enron's rise and fall. We conclude by proposing system modifications to resolve the observed problems.

Keywords: Enron, Corporate Governance, Financial Reporting, Auditors, Financial Analysts, Standard Setters, Audit Committees, Management Compensation

JEL Classification: G10, G20, G34, G38, M41, M49, J33

Suggested Citation

Healy, Paul M. and Palepu, Krishna, Governance and Intermediation Problems in Capital Markets: Evidence from the Fall of Enron (August 15, 2002). Harvard NOM Working Paper No. 02-27. Available at SSRN: https://ssrn.com/abstract=325440 or http://dx.doi.org/10.2139/ssrn.325440

Paul M. Healy (Contact Author)

Harvard Business School ( email )

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National Bureau of Economic Research (NBER)

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Krishna Palepu

Harvard University - Harvard Business School ( email )

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United States
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HOME PAGE: http://drfd.hbs.edu/fit/public/facultyInfo.do?facInfo=pub&facId=6527

Harvard University - David Rockefeller Center for Latin American Research ( email )

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Harvard Business Review ( email )

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NBER ( email )

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HOME PAGE: http://www.nber.org/people/krishna_palepu

International Academy of Management ( email )

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