Covering Up Trading Losses: Opportunity-Cost Accounting as an Internal Control Mechanism
This paper analyzes the methods of loss concealment used by rogue traders in the Barings and Daiwa scandals. The analysis clarifies how and why these firms' top managers and home-country regulators deserve blame for allowing cumulative losses to become so large. The central point is that information systems that focus exclusively on cash flows tempt amoral traders to build credits that generate a high level of accounting profits. Constructing opportunity-cost measures of profit imposes additional restraints on reporting activity. These restraints make it easier for higher-ups, auditors, and regulators to identify the true sources of accounting profit and to challenge counterfeit earnings.
|Date of creation:||Dec 1998|
|Publication status:||published as (Retitled "Breakdown of Accounting at Barings and Daiwa: Benefits of Using Opportunity Cost Measures for Trading Activity") Pacific Basin Finance Journal, Vol. 7 (August 1999): 203-228.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- repec:syd:wpaper:235 is not listed on IDEAS
- W.P. Hogan, 1996.
"The Barings Collapse: Explanations And Implications,"
The Economic Society of Australia, vol. 15(3), pages 1-27, September.
- Hogan, W.P., 1996. "The Barings Collapse: Explanations and Implications," Working Papers 235, University of Sydney, School of Economics.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:6823. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.