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How corporate governance and globalization can run afoul of the law and good practices in business: The Enron's disgraceful affair

  • Rodolfo Apreda

The purpose of this paper is to set out the Enron’s demise into the perspective of Corporate and Global Governance. To accomplish this target, the incremental cash flow model is expanded to give room for governance issues, while a functional introduction to information sets is developed, including bounded rationality, asymmetric information, opportunistic behavior, transaction costs and agency problems. Then, corporate governance is linked to globalization by means of some recent approaches that go beyond a narrow economic mindset to encompass a far-reaching dynamics. Taking advantage of such background, the Enron’s story is tracked down over a span of fifteen years since its starting day to its bankruptcy filing. Leading events are explained from corporate and global governance viewpoints, while an in-depth analysis is worked out on Enron’s complex game of deception and breach of contracts: the outrageous affiliated limited partnerships, the lavish pay package to its executives, the involvement with global governance through the Indian affair and the Taliban connection. It is for the incremental cash flow model to explain malfeasance with cash flows from assets, and how cash flows to creditors were actually contrived. Furthermore, to highlight how cash flows were swindled from stockholders and, finally, how Enron made wheeling and dealing with cash flows on behalf of its managers.

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File URL: http://www.ucema.edu.ar/publicaciones/download/documentos/225.pdf
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Paper provided by Universidad del CEMA in its series CEMA Working Papers: Serie Documentos de Trabajo. with number 225.

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Date of creation: Oct 2002
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Handle: RePEc:cem:doctra:225
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  1. Zingales, Luigi, 1998. "Corporate Governance," CEPR Discussion Papers 1806, C.E.P.R. Discussion Papers.
  2. Joseph Fuller & Michael C. Jensen, 2010. "Just Say No to Wall Street: Putting a Stop to the Earnings Game," Journal of Applied Corporate Finance, Morgan Stanley, vol. 22(1), pages 59-63.
  3. Rodolfo Apreda, 2000. "Differential Rates of Return and Residual Information Sets (A Discrete Approach)," CEMA Working Papers: Serie Documentos de Trabajo. 177, Universidad del CEMA.
  4. Rodolfo Apreda, 1999. "The Cash Flow Model with Float: A New Approach to Deal with Valuation and Agency Problems," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 247-279, November.
  5. Rodolfo Apreda, 2002. "The Governance Slack Model. A Cash Flow Approach for the Budgeting and Accountability of some Corporate Governance Issues," CEMA Working Papers: Serie Documentos de Trabajo. 212, Universidad del CEMA.
  6. Shleifer, Andrei & Vishny, Robert W, 1997. " A Survey of Corporate Governance," Journal of Finance, American Finance Association, vol. 52(2), pages 737-83, June.
  7. Rodolfo Apreda, 2002. "Incremental cash flows, information sets and conflicts of interest," CEMA Working Papers: Serie Documentos de Trabajo. 220, Universidad del CEMA.
  8. Rodolfo Apreda, 2000. "A transaction costs approach to financial assets rates of return," CEMA Working Papers: Serie Documentos de Trabajo. 161, Universidad del CEMA.
  9. Rodolfo Apreda, 2001. "The Brokerage of Asymmetric Information," CEMA Working Papers: Serie Documentos de Trabajo. 190, Universidad del CEMA.
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