Financial illusions during transition: case of Romania
Keywords:
financial frauds, transition, political corruption
Abstract
Abstract: Sometimes, the promoters of the financial products that promise high
abnormal returns succeed in hiding the substantial risks associated. Such financial
illusions have some particularities in countries that experience the transition to the market
economy, where the financial systems are fragile. In this paper we approach some types
of financial illusions experienced in Romania between 1990 and 2000: fraudulent banks,
“mutual-aid games”, rudimentary mutual funds and popular banks. We conclude that they
were favored by circumstances such as the monetary disequilibrium, the delayed
privatization of the banking sector, the financial knowledge lack among the population, the
financial legislation deficiencies and the political corruption.
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50. Voinea, M. and Delcea, C., 2015. 25 de ani de capitalism. Cine a fost in spatele circuitului Caritas: ,,acoperiti" din SRI-ul lui Magureanu controlau listele cu castigatori. Adevarul, [online] Available at:
2. Arnott, R.D. and Bernstein, P.L., 2002. What risk premium is “normal”?. Financial Analysts Journal, 58(2), pp. 64-85
3. Baker, H.K., Filbeck, G. and Ricciardi, V., 2017. Financial Behavior: An Overview. In Baker, H.K., Filbeck, G. and Ricciardi, V., (eds) Financial Behavior: Players, Services, Products, and Markets. New York, NY: Oxford University Press, 2017.
4. Barberis, N. and Thaler, R.H., 2005. A survey of behavioral finance. In Thaler, R.H. ed., 2005. Advances in behavioral finance (Vol. 2). Princeton University Press.
5. Bazerman, M.H. and Moore, D.A., 2013. Judgment in managerial decision making, 8th edition, New York: John Wiley & Sons.
6. Bernstein, P.L., 1996. Against the gods: The remarkable story of risk New York: John Wiley & Sons.
7. Bezemer, D.J., 2001. Post-socialist financial fragility: the case of Albania. Cambridge Journal of Economics, 25(1), pp.1-23.
8. Bhattacharya, U., 1998. On the Possibility of Ponzi Schemes in Transition Economies, [online] Available at:
9. Bichi, C., 2016. Supravegherea bancilor populare: anatomia unei manipulari. OpiniiBNR.ro, [online] Available at:
12. De Hillerin P., A., 2017. Speriați, 27 de ani, de niște proști. Caţavencii, [online] Available at:
14. Dumitriu, R. and Stefanescu, R., 2013. External debt management in Romania, Vanguard Scientific Instruments in Management, 7(2), pp. 47-56.
15. Eaton, R.D.V., 2000. The psychology behind common investor mistakes. AAII Journal, 22(3), pp. 2-5.
16. Edwards, W., 1954. The theory of decision making. Psychological bulletin, 51(4), pp. 380-404.
17. Einhorn, H.J. and Hogarth, R.M., 1981. Behavioral decision theory: Processes of judgement and choice. Annual Review of Psychology, 32(1), pp. 53-88.
18. Eisenberg, D. T. and Quesenberry, N. W., 2014. Ponzi Schemes in Bankruptcy. Touro Law Review, 30(3), pp. 499-537.
19. Fama, E.F., 1970. Efficient Capital Markets: A Review of Theory and Empirical Work. Journal of Finance, 25(2), pp. 383-417.
20. Feraru, R., and Etves, A. 2017. Statul are de acoperit gaura FNI: 451 de milioane de lei pentru 155 000 de pǎgubiţi, [online] Available at:
21. Frankel, T., 2012. The Ponzi scheme puzzle: A history and analysis of con artists and victims. Oxford University Press.
22. Ganzach, Y., 2000. Judging risk and return of financial assets. Organizational Behavior and Human Decision Processes, 83(2), pp. 353-370.
23.Grable, J.E. and Joo, S.H., 2000. A cross-disciplinary examination of financial risk tolerance. Consumer Interests Annual, 46, pp. 151-157.
24. Healy, P.M. and Palepu, K.G., 2001. Information asymmetry, corporate disclosure, and the capital markets: A review of the empirical disclosure literature. Journal of accounting and economics, 31(1), pp. 405-440.
25. Hulsart, R.W., 2010. Swindler’s List: One Hundred Years of Ponzi. Business Studies Journal, 2(1). pp. 73-92.
26. Jordan, J. and Kaas, K.P., 2002. Advertising in the mutual fund business: The role of judgmental heuristics in private investors' evaluation of risk and return. Journal of Financial Services Marketing, 7(2), pp.129-140.
27. Jory, S. and Perry, M.J., 2011. Ponzi Schemes: A Critical Analysis, [online] Available at:
29. Lewis, M.K., 2015. Understanding Ponzi Schemes: Can Better Financial Regulation Prevent Investors from Being Defrauded?. Edward Elgar Publishing Limited.
30. Mackay, C., 1869. Memoirs of extraordinary popular delusions and the madness of crowds. George Routledge and Sons.
31. March, J.G. and Shapira, Z., 1987. Managerial perspectives on risk and risk taking. Management science, 33(11), pp. 1404-1418.
32. Markowitz, H., 1952. Portfolio selection. The Journal of Finance, 7(1), pp. 77-91.
33. Quisenberry, W.L., 2017. Ponzi of All Ponzis: Critical Analysis of the Bernie Madoff Scheme. International Journal of Econometrics and Financial Management, 5(1), pp. 1-6.
34. Popescu, L. 2015. Sistemul bancar se luptă şi după 15 ani cu „fantomele“ a patru dintre băncile care au falimentat în anii 2000. Ziarul Financiar, [online] Available at:
Available at:
37. Sercan, E. and Munteanu M. 2006. Devalizarea Bancorex, operatiunea securistilor. Evenimentul Zilei, [online] Available at:
39. Shefrin, H., 2001. Do investors expect higher returns from safer stocks than from riskier stocks?. The Journal of Psychology and Financial Markets, 2(4), pp. 176-181.
40. Shefrin, H., 2002. Beyond greed and fear: Understanding behavioral finance and the psychology of investing. Oxford University Press.
41. Simon, H.A., 1947. Administrative behavior. A study of decision-making processes in administrative organization. New York: Free Press.
42. Simon, H.A., 1997. Models of bounded rationality: Empirically grounded economic reason (Vol. 3). Cambridge, MIT Press.
43. Stoica, I. and Burlǎ V., 2012. Bancheri și oameni de afaceri turci, ani grei de închisoare pentru falimentarea Băncii Turco – Române, Evenimentul Zilei, [online] Available at:
46. Tapalaga, D., 2007. Spovedania ofiterului Daianu. HotNews.ro, [online] Available at:
48. Thanasi, E. and Riotto, J., 2017. The Spectacular Rise and Disastrous Collapse of a Financial Scheme: The Case of Albania. Open Journal of Business and Management (5), pp. 194-207.
49. Verdery, K., 1995. Faith, Hope, and Caritas in the Land of the Pyramids: Romania, 1990 to 1994. Comparative studies in society and history, 37(4), pp. 625-669.
50. Voinea, M. and Delcea, C., 2015. 25 de ani de capitalism. Cine a fost in spatele circuitului Caritas: ,,acoperiti" din SRI-ul lui Magureanu controlau listele cu castigatori. Adevarul, [online] Available at:
Published
2022-05-18
How to Cite
Stefanescu, R. (2022). Financial illusions during transition: case of Romania. Vanguard Scientific Instruments in Management, 13. Retrieved from https://www.vsim-journal.info/index.php?journal=vsim&page=article&op=view&path[]=149
Section
Articles
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