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Accounting for self interest in the credit crisis

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  • Roberts, John
  • Jones, Megan
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    Abstract

    Taking as its starting point Alan Greenspan's 'shocked disbelief' in the failure of institutional self interest to prevent the credit crisis, this paper sets out to explore two related questions. How was self interest constructed in financial markets? And how might we account for its failure? Conceptually the paper draws upon Callon's (1998) analysis of 'agent-networks', the importance this gives to the agency of non-humans, and his complementary notions of 'framing'/'disentanglement' and 'overflowing' as these allow and subvert the calculation of self interest. Empirically, the paper then presents a sketch of these processes in the rise and then fall of the market for collateralised debt obligations (CDOs) that was central to the credit crisis. The final substantive section of the paper reflects on the role and 'hyperreal' interaction of accounting and models as 'mediators' in these processes.

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    Bibliographic Info

    Article provided by Elsevier in its journal Accounting, Organizations and Society.

    Volume (Year): 34 (2009)
    Issue (Month): 6-7 (August)
    Pages: 856-867

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    Handle: RePEc:eee:aosoci:v:34:y:2009:i:6-7:p:856-867

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    Web page: http://www.elsevier.com/locate/aos

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    1. Miller, Peter & O'Leary, Ted, 2007. "Mediating instruments and making markets: Capital budgeting, science and the economy," Accounting, Organizations and Society, Elsevier, Elsevier, vol. 32(7-8), pages 701-734.
    2. Donald MacKenzie, 2006. "An Engine, Not a Camera: How Financial Models Shape Markets," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262134608, December.
    3. Souphala Chomsisengphet & Anthony Pennington-Cross, 2006. "The evolution of the subprime mortgage market," Review, Federal Reserve Bank of St. Louis, Federal Reserve Bank of St. Louis, issue Jan, pages 31-56.
    4. Alan Greenspan, 2005. "Risk transfer and financial stability," Proceedings, Federal Reserve Bank of Chicago 968, Federal Reserve Bank of Chicago.
    5. Macintosh, Norman B. & Shearer, Teri & Thornton, Daniel B. & Welker, Michael, 2000. "Accounting as simulacrum and hyperreality: perspectives on income and capital," Accounting, Organizations and Society, Elsevier, Elsevier, vol. 25(1), pages 13-50, January.
    6. Ashcraft, Adam B. & Schuermann, Til, 2008. "Understanding the Securitization of Subprime Mortgage Credit," Foundations and Trends(R) in Finance, now publishers, now publishers, vol. 2(3), pages 191-309, June.
    7. Ingo Fender & John Kiff, 2004. "CDO rating methodology: Some thoughts on model risk and its implications," BIS Working Papers, Bank for International Settlements 163, Bank for International Settlements.
    8. Geoffrey Whittington, 2008. "Fair Value and the IASB/FASB Conceptual Framework Project: An Alternative View," Abacus, Accounting Foundation, University of Sydney, Accounting Foundation, University of Sydney, vol. 44(2), pages 139-168.
    9. Peter Miller, 1998. "The margins of accounting," European Accounting Review, Taylor & Francis Journals, Taylor & Francis Journals, vol. 7(4), pages 605-621.
    10. Donald MacKenzie & Fabian Muniesa & Lucia Siu, 2007. "Introduction to Do Economists Make Markets? On the Performativity of Economics
      [Do Economists Make Markets? On the Performativity of Economics]
      ," Introductory Chapters, Princeton University Press, Princeton University Press.
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    Cited by:
    1. Dirk J. Bezemer, 2012. "Modelos contables y comprensión de la crisis financiera," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, Universidad Externado de Colombia - Facultad de Economía, vol. 14(26), pages 47-76, January-J.
    2. Jonathan Njoku, 2012. "Surveillance model of going concern in banking," African Journal of Accounting, Auditing and Finance, Inderscience Enterprises Ltd, Inderscience Enterprises Ltd, vol. 1(1), pages 40-76.
    3. Roberts, John, 2009. "No one is perfect: The limits of transparency and an ethic for 'intelligent' accountability," Accounting, Organizations and Society, Elsevier, Elsevier, vol. 34(8), pages 957-970, November.

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