Assignment on “Enron Scandal”

Course: Corporate Governance

Submitted to:
Prof. Dr. Chowdhury Saima Ferdous
Department of International Business,
University of Dhaka.

Submitted by:
Md Foysal Ahmed
Roll: BB-030-069
Sec-A
MBA-14th batch
Department of International Business

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1. What happened to Enron?

Enron's stock fell precipitously as the accounting scams' specifics came to light. Fastow was let
go, and the stock price of the company fell precipitously from a high of $90 per share in the middle
of 2000 to less than $12 at the start of November 2001. Enron agreed to be acquired by Dynegy in
an effort to avert disaster that month. However, Dynegy pulled out of the agreement a few weeks
later. The disclosure led to a decline in Enron's stock price to below $1 per share, wiping out the
value of the company's employees' 401(k) pensions, which were largely based on the stock price.
Enron filed for Chapter 11 bankruptcy protection on December 2, 2001 (WallStreetMojo, 2020).

2. The Impact of Company on Stakeholders, Economy and the country

While Establised:

A company's establishment can have a significant impact on its stakeholders, the economy, and
the nation. One of the key stakeholders of a firm for obtaining cash are investors, who are attracted
to a company by appealing plans. Between the company's stakeholders, a balance of power and
interest is established. All stakeholders will be impacted by a company's actions, but some may be
more impacted than others (Bodarenko, 2021). For instance, all the various stakeholders will be
impacted if a retail company decides to grow by adding a new store. The economy is also impacted
when a company is founded. The expansion of firms creates new opportunities for economic
growth.

When Collapsed:

Every stakeholder, the economy, and the nation are impacted when a company fails. The
stakeholders experience a loss of influence and motivation over the company's decision-making
procedure and results. However, throughout the liquidation process, certain parties—such as bond
or debenture holders, investors, stockholders, etc.—have a high level of interest in the liquidated
value of the company's assets (McKinsey, 2022). When a business fails, it has a negative impact
on the economy because business activities are suspended, reducing economic production. Overall,
it had a negative impact on a nation.

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3. Impact on individual, economy of a country & other stakeholder for being a
company bankrupted?

Businesses do fail due to either running out of cash as a result of unfavorable external market
conditions or internal issues with inadequate handling and poor management processes as part of
the regular boom and bust cycles of free market capitalism. So instead of being concerned when
bankruptcies happen, business owners and entrepreneurs should focus on how to handle the
aftermath so that shareholders and other stakeholders don't suffer and lose out. The government
and regulators are essential in this effort to ensure that the outcomes are satisfactory for all parties
concerned (Management Study Guide, 2022). For instance, in the United States, where corporate
bankruptcy is typical, there are established and well laid out procedures to resolve bankruptcies.
Perhaps no other country in the world has laws that are so clear-cut, which speaks to how
sophisticated its financial system is and how many institutions it has available to help people and
businesses rebuild their lives following bad events like bankruptcy.

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References
WallStreetMojo. (2020). Enron Scandal. [online] Available at:
https://www.wallstreetmojo.com/enronscandal/?fbclid=IwAR0QsFH_FeMt5zq0hXfjyJ
ObMPXa6WE489lULKFqvRia_Mf4hxi5Y1rz8 [Accessed 2 Jul. 2022].

Bondarenko, P. (2021). Enron scandal - Downfall and bankruptcy. [online] Encyclopedia

Britannica. Available at: https://www.britannica.com/event/Enron-scandal/Downfall-and
bankruptcy.

McKinsey (2022). A new look at how corporations impact the economy and households |
McKinsey. [online] Available at: https://www.mckinsey.com/business-functions/strategy
and-corporate-finance/our-insights/a-new-look-at-how-corporations-impact-the
economy-and-households.

Management Study Guide(2022.). What Happens when Businesses go Bankrupt? Insolvency,

Aftermath, and Recovery. [online] Available at:
https://www.managementstudyguide.com/what-happens-when-businesses-go
bankrupt.htm [Accessed 2 Jul. 2022].