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Backdating More Prevalent among Small Companies

The U.S. corporate world is being roiled by a scandal on bloated stock-option payments that has its epicentre in the Silicon Valley but ripples nationwide with a threat of big-wig arrests. Allegations focus on options backdating, an obscure practice of manipulating the dates on an option that gives employees the right to buy shares at a set price to make the profits more lucrative. The practice was most prevalent among small and tech-sector companies and other enterprises with volatile stock prices, said the authors of the study, Randall Heron of Indiana University and ERIK LIE of the University of Iowa. The paper is based in Malaysia.

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