Hazardous immorality: strategic externalization of risk and credit pricing
Purpose – The purpose of this paper is to examine the risks caused by “hazardously immoral” contracts which force external parties to bear significant losses without their consent.Design/methodology/approach – The expectation of substantial future losses raises the question of how investors can become profitable by entering into such risky contracts. The authors investigate the use of such contracts, which obscure the expected cost of failure by not only concentrating risks but ultimately not taking routine charges for predictable, albeit uncertain, future losses. In their investigation, the authors look at a risk concentration strategy and discuss expected profits (losses) under conditions of limited and unlimited liability.Findings – It is found that companies are more likely to minimize losses and maximize profits if they can obtain credit at a low enough interest rate and externalize the majority of the risk. Risks are more likely to be externalized when government and/or international agencies bail o...
The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron
Lunch on a silver platter "Please keep making us millions" "We were the Apostles" the first prima donna guys with spikes the Empress of Energy the 15 percent solution a recipe for disaster the Klieg-Light Syndrome the Hotel Kenneth-Lay-a Andy Fastow's secrets the big enchilada "An unnatural act" the beating heart of Enron everybody loves Enron when pigs could fly gaming California bandwidth hog "Ask why, asshole" "I want to resign" the $45 million question "We have no cash!" epilogue - isn't anybody sorry?
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