Back-dated stock options and restatements of suspect earnings: Is there a correlation? | Zendy

Joe Ueng | Zendy; Daryl Koehn | Zendy

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Back-dated stock options and restatements of suspect earnings: Is there a correlation?

Author(s) -

Joe Ueng,

Daryl Koehn

Publication year - 2016

Publication title -

corporate ownership and control

Language(s) - English

Resource type - Journals

eISSN - 1810-0368

pISSN - 1727-9232

DOI - 10.22495/cocv13i2p8

Subject(s) - suspect , stock (firearms) , earnings , business , stock price , positive correlation , economics , accounting , psychology , history , medicine , biology , series (stratigraphy) , paleontology , criminology , archaeology

A large number of US companies seem, almost miraculously, to have granted options on dates that coincided with low stock prices. Scholars have documented a pattern of sharp stock appreciation after executives had received stock grants. The pattern suggests that back-dating has occurred. This paper examines whether firms that have restated suspect earnings (we exclude restatements due to backdating) are more likely than non-restaters either to have admitted to back-dating options or to be at risk of being back-daters. We find that both Fortune 500 and non-Fortune 500 restating firms are more likely to be actual back-daters than non-restating firms. Fortune 500 restaters are also more likely to be potential back-daters.

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