Two explanations for the collapse of Barings: incompetence in trading coupled with the looting of the bank by its managers

Purpose This paper is a qualitative historical case study examining the various factors that led to Barings’ bankruptcy with a focus on the criminal conduct identified by the courts, government reports, the media, etc. Design/methodology/approach This historical case study is based on a lecture of : Nick Leeson’s autobiography (1999), The report of the Bank of England; The press; and academic research. Our theoretical framework draws upon: Agency theory (Jensen and Meckling, 1976); research on control fraud; and the theory of corporate looting. Findings This paper argues that Leeson was not a thief, but rather an impostor. The analysis of Barings remuneration policy suggests a case of corporate looting by its own managers: a situation in which the manager extracts more value from the company than it can objectively provide given the wealth. Originality/value Three theories are put forward to explain the collapse of Barings: The exactions of a “rogue trader,” a failure in management control, coupled with the incompetence of Barings’ managers. In a context of financial market liberalization, financial market authorities became powerless. This paper argues that Leeson was not a thief, but rather an impostor. The analysis of Barings remuneration policy suggests a case of corporate looting by its own managers.