The Collapse of Enron: Market Failure or Criminal Conspiracy?

Jacqueline Savukinas

Enterprise Hall, 318
February 01, 2005, 07:00 PM to 07:00 PM


This dissertation discusses the causes of the bankruptcy of Enron, the seventh largest company at the time. In at least the four years prior to its bankruptcy, Enron management conspired to hide the company's debt and manage earnings in order to maintain a share price above the firm's fundamental value. Evidence is presented that shows Enron executives were engaged in illegal behavior, in both its financial and accounting manipulations and also in its trading operations. An event study is implemented to show that the market was not fooled by Enron's false earnings report. Evidence is also presented that shows Enron helped shape public policy in its favor and when it could not, the company received exemptions from rules so that it could achieve its goals. Public and private institutions that should have detected Enron's deceit, as well as other institutions that assisted the company, share responsibility for the company's failure.