Ethics is an important factor in business activities, as it is a method for which businesses must consider achieving their business goals. Individuals and companies interact with each other and gradually forms business organisations. Statistically, those businesses that achieved ethical management were able to gain higher trust and profit from the society, especially the investors, in comparison to other businesses. However, there are businesses that could not establish an ethical management, resulting in significant decrease in the number of current and potential investors. The importance of business ethics and the influences when failing to provide ethical management was shown to the public by the Lehman Brother’s case.
Lehman Brothers Holdings …show more content…
The investment banks in the US, including Lehman Brothers have created new derivatives, which lead businesses to gaining further profit. The creation of derivatives has also established new models for the global financial market. However, as time passed these derivatives that were used gradually resulted in the financial institutions to file bankruptcy.
For the company to earn funds to sustain the business, receiving high credit rates from credit rating companies was required. Improving their cash liquidity and leverage value was needed, as the credit rating companies regarded as important. However, Lehman brothers has had a quarterly loss of $2.8 billion in the second quarter of 2008, making it urgent for them to lower the leverage ratio to reduce the impact on the market.
The company sold their assets to reduce their portion of borrowings, however problems occurred. The company had to dispose assets a value less than the fair value than the records on their books. The equity capital would be reduced and additional valuation losses on similar assets would be expected when loss from the sales of assets were to …show more content…
The stakeholders of Lehman Brothers can be divided into two categories, primary and secondary. The primary stakeholders were the employees of Lehman Brothers Holding Inc., and the secondary stakeholders were investors in the stock market. The credit rating was not composed properly, and despite having a low credit rate, mortgages were sold as a form of bonds. As a result, loans that could not be repaid has increased which affected the stakeholders of Lehman brothers. The domestic and global financial institutions that have invested in Lehman Brothers bonds or derivative financial instruments are the direct victims of the ethical issue. The decision to increase their number of subprime mortgages was what lead the company to bankruptcy. This has created bubbles in their financial statement which made the investors think that their level of finance was at a higher state. Lehman Brothers holdings was negatively impacted by the decision, as they were bankrupt and this affected the international financial market.
4 – decision of involved parties. The decision to use window dressing settlement, lead the company to result in bankruptcy. Lehman Brothers Holdings Inc. filed for bankruptcy on 15th of September 2008 as they could not handle their debt. Due to this incident, not only the financial institutions in the US but also companies around the world were influenced, suffering great loss of investors and customers. Lehman Brother’s price of stocks along with asset
Lehman Brothers Holdings …show more content…
The investment banks in the US, including Lehman Brothers have created new derivatives, which lead businesses to gaining further profit. The creation of derivatives has also established new models for the global financial market. However, as time passed these derivatives that were used gradually resulted in the financial institutions to file bankruptcy.
For the company to earn funds to sustain the business, receiving high credit rates from credit rating companies was required. Improving their cash liquidity and leverage value was needed, as the credit rating companies regarded as important. However, Lehman brothers has had a quarterly loss of $2.8 billion in the second quarter of 2008, making it urgent for them to lower the leverage ratio to reduce the impact on the market.
The company sold their assets to reduce their portion of borrowings, however problems occurred. The company had to dispose assets a value less than the fair value than the records on their books. The equity capital would be reduced and additional valuation losses on similar assets would be expected when loss from the sales of assets were to …show more content…
The stakeholders of Lehman Brothers can be divided into two categories, primary and secondary. The primary stakeholders were the employees of Lehman Brothers Holding Inc., and the secondary stakeholders were investors in the stock market. The credit rating was not composed properly, and despite having a low credit rate, mortgages were sold as a form of bonds. As a result, loans that could not be repaid has increased which affected the stakeholders of Lehman brothers. The domestic and global financial institutions that have invested in Lehman Brothers bonds or derivative financial instruments are the direct victims of the ethical issue. The decision to increase their number of subprime mortgages was what lead the company to bankruptcy. This has created bubbles in their financial statement which made the investors think that their level of finance was at a higher state. Lehman Brothers holdings was negatively impacted by the decision, as they were bankrupt and this affected the international financial market.
4 – decision of involved parties. The decision to use window dressing settlement, lead the company to result in bankruptcy. Lehman Brothers Holdings Inc. filed for bankruptcy on 15th of September 2008 as they could not handle their debt. Due to this incident, not only the financial institutions in the US but also companies around the world were influenced, suffering great loss of investors and customers. Lehman Brother’s price of stocks along with asset