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Investigation of the causes of failure of Lehman Brothers with special reference to agency problems
Finance & Accounting
Pages 34 (8534 words)
Lehman Brothers was amongst the largest investment bankers at the time it was forced to file for bankruptcy and its collapse had significant consequences for the operation financial markets…
This research study mainly focuses on answering the question related to possible agency problems that were instrumental in the failure of Lehman Brothers. It also evaluates other possible reasons of its failure.
The research study was conducted through a literature review and the case study research method. The report relies primarily on secondary research, making use of the existing literature from various articles, journals, and newspapers.
The findings of this study suggested that agency problems played a significant the fallout of Lehman Brothers with the company managers involved in taking several risky investment decisions, less on behalf of the owners of the company and more in the interests of top management. The high amount of incentive compensations offered to the top executives encouraged them to resort to such business strategies. Apart from the failure of risk management control within the company, its complex organisational structure and the adverse impact of global financial crisis also played a role in the collapse of Lehman Brothers.
This research study can thus be helpful in conducting further research on agency problems that can arise in other business organisations worldwide. It can be helpful for companies to develop various means to overcome such problems, leading to more sustainable and less risky growth and development. ...
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