Book review: The Match King: Ivar Kreuger and the Financial Scandal of the Century by Frank Partnoy Book review
Finished reading: 30 August 2017
Finished reading: 30 August 2017
The Match King
The Match King is a historical account of Ivan Kreuger who perpetrated one of the largest financial frauds in history.
The book is a thorough account of how Ivan Kreuger went from being a nobody in Sweden to one of the largest players in global finance prior to the Great Depression rivalling The Morgan banking dynasty. Ivan initially started off by acquiring monopolies to produce matches in various European countries
Ivan manages to keep his empire intact for much longer than anyone would expect, however it finally comes undone through the great depression and Ivan eventually commit suicides.
Ivan comes across as a extreme financier who manages to fend off ever-increasing concerns and questions over the legitimacy of his Match King Empire by maintaining an ere of confidence which enables him to raise increasing amounts of capital to ensure that distributions to existing shareholders and bondholders can continue to be made.
On a positive note Ivan was responsible for many of the financial innovations that we use today such as having various classes of shares that entitled holders to different economic returns.
Ivan’s Match King empire was a mix of a ponzi scheme that required increasing greater amounts of capital to pay distributions, however the underlying busineses were not fictious and made real returns such as when the companies within his Empire were liquidated the returns to shareholders were much greater than zero.
The takeaways I got from the book were that in times of easy money and euphoria people continue to turn a blind eye to the rest and do not even enquire about the most basic common sense financial questions. Ivan attracted capital by offering high returns to investors similar to what the finance companies in NZ did prior to the GFC to attract funding.
The lax financial reporting requirements at the time men that investors we're not provided with adequate financial information but even information they were provided with was not being analysed in an independent and objective manner instead I even used his Charisma to allay any concerns invested may have.
It also shows the slippery slope that humans can encounter once they let their ethics slip. It is easy to keep making further and further transgressions that, although seems small at the time, become increasingly ethical trespasses.
There are also a number of traits that Ivan experienced in his youth that were born out in later years such as even cheating on examinations and forging documents work she also did on a much larger scale near the end of his career.
Conclusion
A good book about human emotions and the euphoria at the time pre-great depression which helps to recognise patterns that may exist in conduct in the financial market in today's frothy environment.
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