Ethical corporate behavior has been a recurring issue of public policy. Recent events have brought this issue into sharp focus beginning with the Enron scandal in 2001 and more recently the financial crisis of 2008. Subsequent regulation such as the Sarbanes-Oxley act seem to be in reaction to the public clamoring for government action in the wake of painful economic outcomes. A deeper examination of the events leading up to Enron and the financial crisis both seem to indicate that government agencies were asleep at the switch. Policy such as Sarbanes-Oxley in the wake of Enron have not prevented the more recent financial crisis of 2008.
Jesswein, K. R. (2009). Analyzing creditworthiness from financial statement in the presence of operating leases. Academy of Accounting & Financial Studies Journal, 13(1), 75-90. Kilpatrick, B. G., & Wilburn, N. L. (2011). Convergence on a global accounting standard for leases - Impacts of the FASB/IASB project on lessee financial.
The financial crisis from 2007 has caused the greatest global economy recession since the Great Depression and also the European sovereign debt crisis. The consequences and cost are enormous. Due to this fact, explanations and responsibilities for financial crisis are searched so that the role of corporate governance and financial engineering is set on the spotlight. The financial crisis has been said to be a case of financial engineering and corporate governance gone wrong. In this paper I will discuss this statement and demonstrate that wrong financial engineering practice and corporate governance effectively caused, or at least in part, the financial crisis.
New York: McGraw-Hill Education Choudhury, A., & Naidu, G. N. (2011). International portfolio diversification based on partial-correlation. Academy of Accounting & Financial Studies Journal, 89-102 Huang, M., & Lin, J. (2011). Do ETFs provide effective international diversification?
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The three most important things that I learned in this course are as follows: 1) Causes of Financial Crisis Financial crises have influenced the os of financial markets in past. The most important the Great Depression in 1929-30, the 1970s inflation failures and the banking difficulties in the 1990s led to problems in the financial markets causing serious disturbance. The recent financial crisis which became known in 2007, though the roots were implanted much earlier, has been the worst situation financial markets have ever faced. Causes of the Financial Crisis Several financial statements have been prepared to describe the causes of this current financial failure. There are a variety of factors that has resulted in the explosion of this financial crisis.
Ocaya (2012) state that the credit crisis is a financial market or economic meltdown of borrowing the funds to the borrower and cannot get back, it evaluated by severe shortage of money or credit bring accumulation of bad debts, defaults and falling financial institutions among others. However, the experts and economists are unclear as what form a credit crisis. The Wall Street defines a credit crisis as a “period during which borrowed funds are difficult to get and, even if funds can find, interest rates are very high”. Credit crisis mostly began in 2007. The effect of the credit crisis has brought fall down on the housing market in some country resulting in foreclosures and unemployment.
Siegel, P. H., Franz, D. P., & O'Shaughnessy, J. (January 01, 2010). The Sarbanes-Oxley Act: A Cost-Benefit Analysis Using The U.S. Banking Industry. Journal of Applied Business Research, 26, 1.) Zhang, I. X.
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The unconventional monetary policies implemented by the Bank of England, U.S. Federal Reserve and the European Central Bank in response to the financial crisis The signification of the financial crisis followed the collapse of Lehman Brothers in September 2008 caused the decrease in the market activity and the growth of globalization economy. A vast of problems, such as deflation, reduction in capital liquidity and so forth, confront with each government and central bank as well as having significant negative effect on development of economy that lowering of GDP. After the financial crisis erupting and spreading to all around the world’s financial condition, some measures for example, lowering of interest rate and keeping the reserve requirement lowing, implemented by central banks aimed at stabilize market price and funds liquidity to support aggregate demand. However, actually, the central banks’ interest rate is very low in United Kingdom, European system and United Stated, which is closing to zero bound, so that it is difficult for central banks to maintain financial condition and support a further stimulation via tool of interest rate (Benford et al, 2009). Meanwhile, commercial banks reduced the aggregate of bank loans in order to remain sufficient reserve and prevent their value of assets, because not enough money expand their investment to profit with high risk investing environment.