The Harvard Law School Forum on Corporate Governance https://corpgov.law.harvard.edu The leading online blog in the fields of corporate governance and financial regulation. Sat, 06 Jun 2026 11:30:34 +0000 en-US hourly 1 https://wordpress.org/?v=6.5.8 https://corpgov.law.harvard.edu/wp-content/uploads/2024/02/cropped-photography-4-e1706898544564-1-32x32.png The Role of Accounting in the Financial Crisis – The Harvard Law School Forum on Corporate Governance https://corpgov.law.harvard.edu 32 32 The Role of Accounting in the Financial Crisis https://corpgov.law.harvard.edu/2012/03/02/the-role-of-accounting-in-the-financial-crisis/?utm_source=rss&utm_medium=rss&utm_campaign=the-role-of-accounting-in-the-financial-crisis https://corpgov.law.harvard.edu/2012/03/02/the-role-of-accounting-in-the-financial-crisis/#comments Fri, 02 Mar 2012 14:36:49 +0000 http://blogs.law.harvard.edu/corpgov/?p=26390?d=20150105135339EST Posted by R. Christopher Small, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Friday, March 2, 2012
Editor's Note:

The following post comes to us from S.P. Kothari and Rebecca Lester, both of the Department of Economics, Finance, and Accounting at MIT.

In our paper, The Role of Accounting in the Financial Crisis: Lessons for the Future, which was recently made publicly available on SSRN, we discuss the causes of the financial crisis, with particular focus on the debated role of the relevant U.S. accounting standards, and summarize implications for accountants and accounting regulators based on the effect of these existing rules.

The Great Recession that started in 2008 has had significant effects on the US and global economy; estimates of the amount of US wealth lost are approximately $14 trillion (Luhby 2009). Various causes of the financial crisis have been cited, including lax regulation over mortgage lending, a growing housing bubble, the rise of derivatives instruments such as collateralized debt obligations, and questionable banking practices. In addition to these and many other reasons, we explain two factors that partially contributed to the crisis: certain management incentives and fair value accounting standards.

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