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New Stock Option Study Involves 2,000 Companies

The stock-option backdating scandal, while not particularly glamorous, is also weighing on the stock market. It might get worse before it gets better. Several news outlets reported recently that a new study by the finance professor who first brought the backdating issue to the attention of regulators has found that the scandal could extend far beyond the 60 or so companies currently involved and could encompass more than 2,000. University of Iowa Professor ERIK LIE's new study found that from 1996 to 2005, 29 percent of companies used backdated options and 14 percent of options granted to top executives during that period were backdated, numbers that widen the scope of this scandal by several orders of magnitude. Most of the suspicious activity occurred prior to 2002, when the Sarbanes-Oxley Act went into effect requiring companies to report stock-option grants within two days rather than 40.

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