Why using such a financial instrument would be attractive

Reference no: EM131500223

Question: During the wave of corporate accounting scandals in 2001, it was revealed that Enron had raised money using a special financial instrument that had been developed by the investment banking firm of Goldman Sachs & Company. The financial instrument, called a MIPS (Monthly Income Preferred Shares), "was designed in such a way that it could be called debt or equity, as needed. For the tax man, it resembled a loan For shareholders and rating agencies it resembled equity" [McKinnon and Hitt 2002] Explain why using such a financial instrument would be attractive to a corporation (or at least a corporation man-aged by people who weren't overly concerned with ethical issues).

Reference no: EM131500223

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