These new and less experienced players concentrated in particular on shares that are quoted on the technology oriented Nasdaq exchange, which greatly influenced the pricing of similar shares around the world. While more professional and institutional investors accounted for 90 per cent of trading on the New York exchange, during the stock market boom around half of Nasdaq’s turnover came from private individuals. Studies also indicate that companies, analysts and banks had incentives to use somewhat questionable means of attracting inexperienced investors to buy shares in new enterprises. Lacking an adequate cash flow, many new technology companies were dependent on raising money from new share issues to pay their employees and procure equipment. That in turn called for a high share valuation. This gave managements an inducement to “doctor” reports and statements about their company’s future performance. The disclosures about WorldCom and Enron clearly show how an environment developed in which managements also stood to gain from stretching the accounting regulations in order to meet market expectations. It also looks as though the same environment left its mark on the large corporations’ auditors, who likewise needed to modify the extent and direction of their services in order to generate income and profits and survive in the new economy. In certain respects it amounted to breaking the law. In other instances it was the law that was not sufficiently clear or extensive. Analysts and investment banks that earned money by arranging share issues evidently lacked an incentive to make a critical appraisal of corporate reports and statements.

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