Chapter

The Enron Scandal: Legal Reform and Investor Protection in the United States

in Law and Capitalism

Published by University of Chicago Press

Published in print June 2008 | ISBN: 9780226525273
Published online March 2013 | e-ISBN: 9780226525297 | DOI: http://dx.doi.org/10.7208/chicago/9780226525297.003.0004
The Enron Scandal: Legal Reform and Investor Protection in the United States

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This chapter discusses the collapse of Enron and its aftermath. Enron's breathtakingly rapid unravelling in 2001 threw a good deal of cold water on the perception that the United States had reached the zenith of legal and corporate governance. This perception had been building throughout the 1990s, propelled in part by the law and finance literature. The chapter opts for a simple rendition of the crisis, because the precise mechanics of Enron's accounting fraud are less important for its purposes than situating the event in the contemporary U.S. market and legal structures. The Enron saga vividly underscores that all market-oriented economies, however highly developed, require constant regulatory recalibration; the legal infrastructure for a capitalist economy is always under construction. The chapter also shows how a decentralized and highly protective legal system helps give rise to and responds to a corporate crisis. The legal response to the Enron debacle and other corporate scandals in the United States in the name of investor protection has proved to be almost as controversial as the underlying events.

Keywords: Enron; United States; corporate governance; accounting fraud; capitalist economy; legal system; corporate scandals; investor protection

Chapter.  8580 words. 

Subjects: Company and Commercial Law

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