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Discussion of "The impact of the options backdating scandal on shareholders" and "Taxes and the backdating of stock option exercise dates"

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  • Armstrong, Christopher S.
  • Larcker, David F.

Abstract

Bernile and Jarrell provide extensive analysis regarding the impact of backdating the stock option exercise price on stock returns for a sample of firms identified by the Wall Street Journal. Dhaliwal, Erickson, and Heitzman investigate whether executives backdate the exercise date to obtain favorable tax consequences. This discussion comment focuses on several fundamental issues that confront researchers examining the backdating scandal and other related decisions. Specifically, we discuss the decision models for executives engaged in backdating and the potential role of social networks among directors, selection considerations, institutional voting behavior, and how backdated options can be replicated with existing equity instruments.

Suggested Citation

  • Armstrong, Christopher S. & Larcker, David F., 2009. "Discussion of "The impact of the options backdating scandal on shareholders" and "Taxes and the backdating of stock option exercise dates"," Journal of Accounting and Economics, Elsevier, vol. 47(1-2), pages 50-58, March.
    • Handle: RePEc:eee:jaecon:v:47:y:2009:i:1-2:p:50-58
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    References listed on IDEAS

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    1. Erik Lie, 2005. "On the Timing of CEO Stock Option Awards," Management Science, INFORMS, vol. 51(5), pages 802-812, May.
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    Cited by:

    1. Christopher S. Armstrong & Alan D. Jagolinzer & David F. Larcker, 2010. "Chief Executive Officer Equity Incentives and Accounting Irregularities," Journal of Accounting Research, Wiley Blackwell, vol. 48(2), pages 225-271, May.
    2. Chahine, Salim & Fang, Yiwei & Hasan, Iftekhar & Mazboudi, Mohamad, 2019. "Entrenchment through corporate social responsibility: Evidence from CEO network centrality," International Review of Financial Analysis, Elsevier, vol. 66(C).
    3. Guthrie, Graeme & Stannard, Tom, 2020. "Easy money? Managerial power and the option backdating game revisited," Journal of Banking & Finance, Elsevier, vol. 118(C).
    4. Larcker, David F. & So, Eric C. & Wang, Charles C.Y., 2013. "Boardroom centrality and firm performance," Journal of Accounting and Economics, Elsevier, vol. 55(2), pages 225-250.
    5. Larcker, David F. & So, Eric C. & Wang, Charles C. Y., 2010. "Boardroom Centrality and Stock Returns," Research Papers 2061, Stanford University, Graduate School of Business.
    6. Chris Veld & Betty H.T. Wu, 2014. "What Drives Executive Stock Option Backdating?," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 41(7-8), pages 1042-1070, September.
    7. Cheng, Shijun & Felix, Robert & Zhao, Yijiang, 2019. "Board interlock networks and informed short sales," Journal of Banking & Finance, Elsevier, vol. 98(C), pages 198-211.

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    Keywords

    Backdating Stock options;

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