The rise and fall of the Judge and Renouf Corporations: extravagant reporting and publicity

Abstract

In this paper, we examine the role of financial reporting in the rise and fall of Renouf Corporation and of Judge Corporation. These two New Zealand companies were nominated by The Wall Street Journal as the two worst performing shares on the Australasian sharemarket of 1987.

To explain the sudden rise and fall of the Renouf and Judge Corporations, we discuss some significant structural features of the 1980s’ share market. We seek to explain the conditions that made such a dramatic rise and fall possible. In particular, we examine how key directors presented themselves as financial experts and created favourable impressions of profit and growth. Second, we focus on the use of creative accounting strategies and the manipulation of accounting information. Third, we analyse the contribution of financial institutions and regulatory bodies in permitting breaches of financial ratios and market rules.

We conclude by noting the recurrence of sharemarket collapses and the concurrent examples of investor beguilement that often accompany such collapses. Spectacular rises and falls in company perfomance, we suspect, may be repeated because the elements of rhetoric/discourse which bring particular companies to sudden prominence create such a persuasive and an often irresistible version of ‘truth’.

Keywords:

• accounting history
• discourse
• rhetoric
• financial reporting
• creative accounting
• business