News & Events

Lie Study Found Stock Options Backdating

The FBI and federal prosecutors in San Francisco said Thursday that they are escalating their investigation into possibly illegal stock option backdating by area companies. U.S. Attorney Kevin Ryan announced that a new eight-person task force will try to determine whether Northern California companies retroactively changed the grant date of stock options with intent to defraud investors. ERIK LIE, a finance professor at the University of Iowa's business school, has evaluated thousands of option grants and found that for many companies, it was statistically improbable for them not to have been backdated. Lie estimates that at least 10 percent of option grants to chief executives between 1996 and August 2002 were backdated. Lie said in an interview on Thursday that three company features contribute to backdating. "Small firms tend to do it more than large firms," he said. "Firms with higher stock price volatility tend to do it more than others. Tech firms tend to do it more than others."

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