Enron & Parmalat two twins parables

Abstract

The Idea to write this work is born from the wish to deepen the study of the phenomenon of business crisis, of the risk management and of the processes of restructuring proposed by the management of Enron and Parmalat. These two financial bankruptcies have marked a new century, the bankruptcy of Enron and Parmalat have had a great impact on accounting firms and financial institutions, and have raised several questions on the independence of auditors and analysts. This document is composed of five chapters: The first chapter introduces the matter of business crisis offering a definition of the concept of crisis as a support to continue my dissertation. Besides, I try to underline the importance of the individualization and quantification of the objective and subjective causes of crisis of company giving a brief explanation on the system-company, analysing different American, English and Italian authors. In the chapter II, I introduce the theory of the turnaround as solution of the crisis of the company, proposing the concept and its strategic, economic and organizational aspects. In this chapter, I offer an overview of the main international systems of management of the enterprise crisis, focusing the attention on the American system, of which I analyze the public procedure of chapter 11 and Italian corporate reorganization. In the chapter III, I start to analyze the Enron Group, offering an inherent picture of the decade 1991-2000: describing the history of the society, its steps of expansion and its areas business. Then I summarise the phases of the collapse of Enron, trying to explain those that, in my opinion, were the causes of the crack of the society which can be considered. In this chapter it is stressed the analysis of the role of equity research analysts in the case of Enron and how the valuations of the company did not reflect the information of the company available: many alarming signals were publicly available and were overlooked by analysts who maintained positive recommendations on the company. In the chapter IV, I start to analyze Parmalat, giving a general overview, quickly summarising the history of the company, its international acquisitions and mergers, proposing an economic analysis through the reading of the group's reports. In this chapter, I offer a brief analysis of the comedown of parmalat analyzing in the specific all the causes that have brought in my opinion to the default procedures for the group. At the end of this work, there are the conclusions where I analyze two financial bankruptcies comparating two twins parables.