Fall of Enron

The Fall of Enron Healy, P. M., & Palepu K. G. (2003). The fall of enron. Journal of Economic Perspectives, 17, 3-26. Enron was founded by Kenneth Lay in 1985 through the merger of two essential particle accelerator pipeline companies, Houston Natural Gas and InterNorth. Enron owned intra- and interstate pipelines for transporting indispensable gas in the midst of producers and utilities. In the early 1980s, the record of contracts between natural gas producers and pipelines guaranteed long-term stability in supply and prices of natural gas. In the mid-1980s, deregulation in the natural gas market place prompted lower prices and increased supply, and also unpredictability in gas prices. Suppliers had more power under these circumstances. Hence, Jeff Skilling proposed cornerstone of a natural gas bank which would act give care a financial banking institution, except that Enron would be the intermediary between suppliers and buyers of natural gas. To ensure the effectiveness of this plan, Enron entered into fixed price transcription with producers and used financial derivatives such as swaps, forward and afterlife contracts. It also started the use of Special Purpose Entities to finance closely of the transactions.

The plan was a success and Enron became the largest trader of natural gas in North America and the trade business delineate a large sum of its net income. Enron Online, an on-line trading model, further helped in its growth and development. In the late 1990s, Skilling proposed that knowledge was the key to enable Enron to develop its niche in the market instead of heavy assets such as pipelines. The company currently developed expertise in managing the trading business risks. back up in the mid-1990s, Enron began leveraging its gas trading model and systems and expertise it had acquired in gas trading to other markets. It got involved in the market for electric power, coal, steel, paper and pulp, water and broadband part optic cable capacity. Enron grew from a pure energy sloshed into a broad-based... If you want to get a full essay, assign it on our website: Ordercustompaper.com

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