The Fall of Enron
- despite this elaborate corporate governance network, Enron was able to attract large sums of capital to fund questionable business model, conceal its true performance through a series of accounting and financial maneuvers and hype its stock to unsustainable levels
- the stresses that the business model created for Enron’s financial reporting, and how key capital market intermediaries played a role in the company’s rise and fall
- growth impressed the capital markets and few asked questions
- the company was unsure if it could continue to earn high returns from gas trading
- it was believed that the major barrier to entry in gas trading was Enron’s market knowledge achieved through its dominant market position
- many other firms were positioned to challenge Enrons dominance, including large gas producers
- in comparable markets, early rents to first movers had quickly dissipated as competitors entered
- the internet provided a low cost platform for existing or potential competition to develop energy markets that could compete with EnronOnline
- Enron had some success in applying the gas bank trading model to electricity, but the viability of the model for some of the other products selected for expansion was uncertain
- Even if Enron was successful in the international energy market questions could be raised about whether the company could create a sustainable advantage over competitors that later sought to enter the market
- Enron took full advantage of accounting limitations in managing its earnings and balance sheet to po ...