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Article
Publication date: 8 May 2018

Kienpin Tee and Marilyn Wiley

The 2008-2009 subprime mortgage crisis in the USA caused bankruptcies and closures of many financial institutions. Yet many CEOs of US financial institutions were awarded…

Abstract

Purpose

The 2008-2009 subprime mortgage crisis in the USA caused bankruptcies and closures of many financial institutions. Yet many CEOs of US financial institutions were awarded huge bonuses and pay packages despite the economic collapse, suggesting that their incomes were not in conjunction with those of the shareholders, indicating a serious agency problem. This issue raises the question as to whether stock option backdating, another example of an agency problem, was as prevalent as slack lending policies among these financial institutions. This paper aims to compare the relative magnitude of executive option backdating in financial and nonfinancial firms.

Design/methodology/approach

Using a sample of CEO stock option grants from 1995 to 2006, obtained from ExecuComp, the authors employ an event study around the grant dates of executive options. The authors compare the abnormal price movements between financial and nonfinancial firms.

Findings

The abnormal negative stock returns were found before the award dates for both groups of firms. The after-event abnormal returns of both groups of firms, however, show different trends. For nonfinancial firms, there is an immediate turnaround of the abnormal return movement right after the grants; that is, the price increases, indicating the occurrence of significant backdating events. For financial firms, however, there is no significant price rebound after the grant date. In fact, the price continued to decline throughout the after-event period.

Research limitations/implications

The result shows that nonfinancial firms demonstrate significantly more option backdating behavior than financial firms.

Practical implications

The findings suggest that previous findings on prevalent backdating among all public listed firms are only partially correct. This paper shows that backdating behavior found in previous studies is indeed driven by nonfinancial firms. This unexpected finding contradicts the initial prediction of authors that option backdating may be more likely among financial firms.

Originality/value

Based on previous research, the authors recognize that generally the official grant dates of firms must have been set retroactively, as shown by Lie (2005). The findings, however, show that financial firms demonstrate only partial backdating behavior. This study opens a path for future research to further discover why financial firms exhibit less backdating behavior compared with nonfinancial firms, and if option backdating is not an issue for financial firms, why the share prices of these firms decline significantly prior to the grant date.

Details

Journal of Financial Crime, vol. 25 no. 2
Type: Research Article
ISSN: 1359-0790

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Corporate Fraud Exposed
Type: Book
ISBN: 978-1-78973-418-8

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Book part
Publication date: 26 July 2014

Jakob Edler, Daniela Frischer, Michaela Glanz and Michael Stampfer

University governance is constantly challenged by changing expectations and contexts. New, prestigious and well-endowed funding schemes are one possible source of pressure…

Abstract

University governance is constantly challenged by changing expectations and contexts. New, prestigious and well-endowed funding schemes are one possible source of pressure for change of university governance. This article analyses the impact of one such scheme, the grants of the European Research Council (ERC), on the governance of European universities. After outlining a model of how this impact on universities can be expected to occur, we present the results of an exploratory study at a very early stage of the ERC’s existence (2010–2011). The empirical analysis is based on an investigation of 11 universities in eight countries, which shows that different kinds of universities are affected in varied and often unexpected ways, with particular differences arising at different levels within the universities.

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Organizational Transformation and Scientific Change: The Impact of Institutional Restructuring on Universities and Intellectual Innovation
Type: Book
ISBN: 978-1-78350-684-2

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Book part
Publication date: 5 January 2006

Corey Rosen

This paper looks at the research to date on the future of broadly granted stock options (options granted to at least half the full-time employees of a company). In the…

Abstract

This paper looks at the research to date on the future of broadly granted stock options (options granted to at least half the full-time employees of a company). In the U.S., granting options broadly became popular in the late 1990s, but has lost some of its appeal in the wake of stock market declines, accounting changes, and increased shareholder concerns about dilution. The data indicate a significant minority of companies will change their plans, but a substantial majority will keep them. The data also indicate changes in accounting rules will not affect stock prices and that broadly granted options are better for corporate performance than narrowly granted options.

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Participation in the Age of Globalization and Information
Type: Book
ISBN: 978-0-76231-278-8

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Book part
Publication date: 22 April 2015

Price Fishback

During the 1930s Franklin Roosevelt’s New Deal created a wide range of spending and loan programs. Brief descriptions are provided for the programs created by the New Deal…

Abstract

During the 1930s Franklin Roosevelt’s New Deal created a wide range of spending and loan programs. Brief descriptions are provided for the programs created by the New Deal and loan and spending programs that were in place before the New Deal. I worked with others to create a panel data set with estimates of the spending and lending by the programs each year from 1930 through 1940. The data aggregated to broad categories are reported here and the methods and sources used to construct the estimates of the spending and lending for the categories are discussed.

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Research in Economic History
Type: Book
ISBN: 978-1-78441-782-6

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Book part
Publication date: 1 July 2004

John L. Peterman

A study of the price discounts granted by Morton Salt Company and other producers of table salt in the U.S. on their sales of table salt to grocery wholesalers and…

Abstract

A study of the price discounts granted by Morton Salt Company and other producers of table salt in the U.S. on their sales of table salt to grocery wholesalers and retailers. The discounts were found to be illegal under the Robinson-Patman Act by the Federal Trade Commission and the Supreme Court. The Commission and the Court believed that the discounts were unjustified price concessions granted to “large” buyers, consistent with the concerns of the Robinson-Patman Act. However, the evidence indicates that the most common discount – the “carload discount” – was received by virtually all buyers, regardless of the buyer’s size; the other discounts – “annual volume” discounts – though received primarily by “large” buyers, were likely cost based. The history of the discounts and likely reasons why they were granted are explored in detail.

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Antitrust Law and Economics
Type: Book
ISBN: 978-0-76231-115-6

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Book part
Publication date: 21 May 2005

M. McAleer, Daniel Slottje and Pei Syn Wee

Abstract

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Patent Activity and Technical Change in US Industries
Type: Book
ISBN: 978-0-44451-858-3

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Book part
Publication date: 11 August 2014

Zhan Jiang, Kenneth A. Kim and Yilei Zhang

The change in CEO pay after their firms make large corporate investments is examined. Whether the change in CEO pay is a beneficial practice or harmful practice to firms…

Abstract

Purpose

The change in CEO pay after their firms make large corporate investments is examined. Whether the change in CEO pay is a beneficial practice or harmful practice to firms is investigated.

Design/Methodology/Approach

A sample of firms that make large corporate investments is identified. For this sample, we identify the change in CEO pay before and after the investment, and we also measure the pay-for-size sensitivity of these investing firms.

Findings

For firms that make large corporate investments, CEOs get significantly more option grants when their firms’ stock returns are negative after the investments and these investing CEOs get more option grants than noninvesting CEOs.

Research Limitations/Implications

The present study suggests that firms may have to increase CEO pay after large corporate investments to encourage investment. However, the results may also be consistent with an agency cost explanation. Future research should try to distinguish between the two explanations.

Social Implications

The study reveals a potential way to prevent CEOs from underinvesting.

Originality/Value

The study provides important insights to shareholders on how to encourage CEOs to get their firms to invest, and on how to view CEO pay increases after their firms invest.

Details

Advances in Financial Economics
Type: Book
ISBN: 978-1-78350-120-5

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Book part
Publication date: 8 August 2014

Karen Pierce, Ted D. Englebrecht and Wei-Chih Chiang

This study examines whether Revenue Procedure 2003-61 is an improvement over Revenue Procedure 2000-15, in the areas of taxpayers’ expectations for IRS equitable relief…

Abstract

This study examines whether Revenue Procedure 2003-61 is an improvement over Revenue Procedure 2000-15, in the areas of taxpayers’ expectations for IRS equitable relief decisions and gender-related in-group bias. The survey instrument includes a vignette adapted from a judicial decision. The results show that Rev. Proc. 2003-61 does improve upon Rev. Proc. 2000-15. Furthermore, taxpayers perceive different expectations of what the IRS should do and what the IRS would do in equitable relief decision making. Also, gender-related in-group biases are found to be present for both genders. Tax policy implications regarding equitable relief are discussed.

Details

Advances in Accounting Behavioral Research
Type: Book
ISBN: 978-1-78190-838-9

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Book part
Publication date: 11 July 2014

Matthew M. Mars

This chapter opens with a brief historical account of the vision and development of the land grant college and university system. This account begins to frame the land…

Abstract

This chapter opens with a brief historical account of the vision and development of the land grant college and university system. This account begins to frame the land grant model as an important American social innovation. Next, the legacy of the land grant system as a social innovation is extended through a review of the role the Cooperative Extension System in enacting the New Deal during the Great Depression era. The topic culminates in the chapter with a critical exploration of the revenue-driven university technology transfer system that is currently in place and presents an alternative model that is anchored in the principles and practices of social entrepreneurship. Land grant colleges and universities are positioned as key agents in advancing such an alternative model, which is consistent with the historical role these institutions have played in advancing the economic and social interests of the nation.

Details

Innovative Pathways for University Entrepreneurship in the 21st Century
Type: Book
ISBN: 978-1-78350-497-8

Keywords

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