Another main cause of the firm’s failure investigated from the prior financial
scandals is perhaps the firm’s mismanagement which is the consequence of the
management decision heavily reflecting self-serving behavior. In general, the action of
management could be seen through the firm’s corporate governance practices. For
example, the failure of Enron in 2001 was due to weak corporate governance mechanisms
that provided an opportunity to the firm’s executives to commit the fraud. WorldCom had
also reported that its earnings were subject to earning management, indicating the
problems of the accounting irregularities and lack of good monitoring system. Hence, these
two events have raised the attention of individuals about the corporate governance; the
trend is toward better corporate governance.