The Role of SPEs in the Enron Scandal and Its Implications for China

DOI

10.2991/aebmr.k.210917.001How to use a DOI?

Keywords

Special purpose entity, Enron, financial frauds, Sarbanes-Oxley Act

Abstract

Special purpose entity (SPE) is a type of financial instrument that can legally help companies reduce debt, raise capital, reduce stress, and reduce losses and is widely applied in U.S. companies. However, from Enron Scandal, SPE may also let firms be exposed to certain risks. This paper aims to study the role of SPE in the Enron financial frauds. We also examine the application of SPE in the Chinese market and discuss its future development. A case study was conducted on Enron, and we also studied the current applications of the existing SPEs in China. This paper finds that SPEs did facilitate Enron’s growth and contributed to its failure because SPE may lower the cost of financial misreporting. Therefore, we suggest that more subtle regulations should be imposed on SPE. We also review the Chinese SPEs and suggest that relevant regulations should be applied to protect investors’ interests.

Copyright

© 2021, the Authors. Published by Atlantis Press.

Open Access

This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).

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TY  - CONF
AU  - Shihan Liu
AU  - Lingyuan Lu
AU  - Yidi Wu
PY  - 2021
DA  - 2021/09/18
TI  - The Role of SPEs in the Enron Scandal and Its Implications for China
BT  - Proceedings of the 2021 International Conference on Financial Management and Economic Transition (FMET 2021)
PB  - Atlantis Press
SP  - 1
EP  - 6
SN  - 2352-5428
UR  - https://doi.org/10.2991/aebmr.k.210917.001
DO  - 10.2991/aebmr.k.210917.001
ID  - Liu2021
ER  -