The Enron Implosion and Its Lessons

Enron's implosion in 2001 took the world capital markets by surprise and shook the investor confidence in accounting and financial reporting. It even caused the collapse of the prestigious international accounting firm of Arthur Andersen. From the most innovative corporation, Enron suddenly became the poster for executive greed and flaws in corporate governance. An event of the magnitude of Enron's collapse has serious consequences for the efficient functioning of capital markets worldwide. The purpose of this paper is to review Enron's growth, roles of its key executives, specialpurpose entities and the auditors, and the prevailing corporate culture. The paper ends with the suggestions to improve corporate governance for preventing such future corporate failures.