Lehman Brothers and Bear Stearns: risk assessment and corporate governance differences?

Abstract

In mid-March, 2008, with substantial government support, JP Morgan Chase agreed to acquire Bear Stearns for $10 per share. Because Bear’s shares traded at $170 a year earlier, the market cap destruction of 94% was devastating to the once venerable investment bank and its investors. The Financial Crisis Inquiry Commission had also cited as failure the inconsistent treatment by the federal government in helping to bail out Bear Stearns in March, 2008 but letting Lehman Brothers go into bankruptcy in September, 2008. This paper investigates such inconsistencies by comparing and assessing the risk management and corporate governance practices of Bear Stearns and Lehman Brothers in their March-September, 2008.