This study assessed the failure of the Lehman
brothers. The aim was to evaluate the causes of Lehman's bankruptcy and
determine the strategies that could prevent bankruptcy in the banking sector
going forward. Findings indicated a close relationship between regulations and the
actions of management. In particular, the failure of Lehman showed that
regulation and supervision are critical to the success and continuity of the
banking sector. The analysis also showed that the demise of Lehman was a result
of complex factors. These included unethical management practices,
deregulation, excessive risk-taking, poor corporate governance structure,
fraud, and lack of a robust ethics code.
Keywords: Derivatives, Hedging, Subprime Mortgage, Bankruptcy.