StudentShare solutions
Triangle menu

Lehman brothers - Literature review Example

Nobody downloaded yet

Extract of sample
Lehman brothers

The trick works perfectly, and manages to lure unsuspecting investors into trusting the company’s financial reports. Banks however use Repo 105 for purposes of short term borrowing, while in the case of Lehman, it was used to reflect a healthier balance sheet than it actually was. Jeffers (2011, p. 2) observes that the Lehman brothers used the “Repo 105” in its accounting severally to report impressive financial statements and win the trust of potential investors, by showing healthy securities. The company was an investment bank which had gone global. Lehman’s’ auditors on three occasions used the Repo 105 creative accounting trick to boost investor confidence. The trick used by Lehman helped them temporarily remove from its balance sheet roughly $ 50 billion, making the balance sheet look better the actual status of the company’s financial statements. However, at the time of filing its bankruptcy case, the company has a total of $ 639 billion in assets and $ 619 billion in debts. This formed the biggest bankruptcy case that affected over $ 10 trillion in investments. The company’s scheme involved the use of collateral firms such as Alpha Ville, with counter parties from banks such as Barclays Bank of Britain, USB of Switzerland, Mizuho Bank and Mitsubishi UFJ Financial Group. To be exact, the company involved in Repo 105, the transactions’ worth was estimated at over 105 per cent of the actual cash it received. This meant that the company was experiencing a shortage through these transactions. When they repaid the cash it received from the counterparties, interest was included, which made it a very expensive technique, thus losing money. Repo 105 is a tricky phenomenon for any company which opts to use it as a model of reporting its financial status. According to accounting standards, it is wrong and unethical for a firm to alter its books of accounts (Nguyen & Gong, 2012, p. 31). It is an issue that is quite sensitive, deciding to report a misleading state of a company’s financial status. Whether such a situation finds its way to legal courts or not, it makes no difference, involved parties ought to hold responsibility for any eventuality through their actions. Not unless a company is planning on a strategy to defraud and steal from potential investors, it would never go to such lengths like Lehman did, with clear knowledge of the implications that are likely to come (Law, 2011, p 511). Some examiners hold that “Repo 105” actually is a “gross negligence” and does not amount to crime. However, the fact that Lehman altered its accounts with the intention of deceiving investors, rating agencies and perhaps the industry regulators is proof enough that this was criminal and that the presenters of the company acted in malice. The scheme led to the largest corporate bankruptcy case in the United States financial history (Sharp, 2010, n.p). Investors lost money, in the process. No matter how much conservatives refer to this as a form of negligence, it is still a crime. According to the accounting theories, Lehman accountants and managers contravened the theories of accounting and broke the oath of conduct of accountants. Although some scholars like Jennings (2011, p. 38) felt that the internal misleading of the company itself by the altered ...Show more


LEHMAN BROTHER AND THE “REPO 105” SCANDAL By Institution Date Lehman Brothers and the “Repo 105” Scandal 1. The “Repo 105” is an accounting trick commonly used by banks and other financial institutions such as investment banks, whereby they report a short-term loan as a sale, which of course is not…
Author : kbarton
Lehman brothers essay example
Read Text Preview
Save Your Time for More Important Things
Let us write or edit the literature review on your topic
"Lehman brothers"
with a personal 20% discount.
Grab the best paper

Check these samples - they also fit your topic

Investigation into the Sovereign Debt Credit Ratings of Five EU Member States and China over the Period 2005-2012
2007). Minescu (2011) thinks similar with the Asian financial turmoil and the Nordic countries crisis; the main reason lied in rapid growth of long-term new loans and assets price. Although there are many special characteristics in the current sovereign debt crisis, the European Commission (2009) thought that the causes are similar to that for previous crises in Asia in late 1990s or the Nordic countries in the early 1990s.
15 pages (3750 words) Literature review
Strategy management
Analysis………………………………………………………………….. 3 5. Example…………………………………………………………………. 4 6. References………………………………………………………………..
12 pages (3000 words) Literature review
The Effect of the Economic Downturn on the Properties Industry in South of France: Cote D'Azur , Province
However the downswing in the property markets experienced by those contexts pushed this whole process in a reverse resulting downward mortgage loans, weakening of bank balance sheets and depression of consumer spending (Allen and Carletti, 2009; Nordlundm and Lundstrom, 2011; Woods, 2007).
4 pages (1000 words) Literature review
The Impact of the Subprime Mortgage Crisis on the UK Economy
These upsets, together with the extensively reported credit crisis, have deepened what otherwise might have been a placid financial slump. The UK financial system is now in the middle stages of a financial slump. A number of regions of the country will undergo excessively harsh financial situations.
8 pages (2000 words) Literature review
Derivatives as a way of mitigating financial risk
These variables determine the payments that must be made for the parties. Assets that are used include stocks, commodities, bonds, currencies and interest rates. Common types of derivates available are swaps, futures, forwards and options. The instruments are given special legal exemptions so that they are used to obtain credit.
8 pages (2000 words) Literature review
The effect of the recent financial crises on the UK investors psyche
In this study, we examine the effect of the financial crisis on the investors at a large. The discussion involved how the investors take decisions before investing in the stock market. Their behaviours are studied in order to get a real picture of the stock market investment during and after the period of financial crisis.
9 pages (2250 words) Literature review
Regressing Japans economic growth
The economic growth may have had many effects and the monetary policy will be discussed in connection to this.
8 pages (2000 words) Literature review
Strategy management
In accordance with Mintzberg (1998) the manager when acting as a craftsman, he ‘senses rather than analyzes’ (Mintzberg, 1988, p.71). This
12 pages (3000 words) Literature review
The Impact of the Subprime Mortgage Crisis on the UK Economy and on its Central Banks from 2007-2011
A number of regions of the country will undergo excessively harsh financial situations. The huge amount of non-conventional mortgages has deepened the existing housing market slump. The subprime mortgage crisis has already influenced the overall economy. The fall in home
8 pages (2000 words) Literature review
The impacts of recent recession on consumer behaviour within Airline industry
Although, the product itself has an importance but the consumer behaviour can be affected by various psychological and environmental factors (Hitt, Hoskisson and Ireland, 2008). The consumer development
12 pages (3000 words) Literature review
Hire a pro to write
a paper under your requirements!
Win a special DISCOUNT!
Put in your e-mail and click the button with your lucky finger
Your email
Comments (0)
Click to create a comment
Contact Us