Study: CEOs Who Graduated During Boom Times Backdated Stock Options 30 Percent More

Chris Gaetano
Published Date:
May 15, 2017
Lying Man

A recent study has found that CEOs who graduated during economic boom times were 30 percent more likely to falsify the dates of their stock option grants than those who graduated in economically lean periods, according to the Harvard Business Review. The researchers looked at 2,012 American CEOs during a 10-year period, from 1996 to 2005, and then used already-established procedures to determine whether it was likely that a stock was backdated (they consider it to have happened if it was received on one of the most favorable days of the reporting period). While they concede that there is a chance a CEO may simply have been lucky, studies have repeatedly shown that they tend to be more lucky than random chance alone should predict: luck, they said, should account for only 2.5 percent of grants awarded on incredibly lucky dates by chance alone, but the sample turned out a 15 percent rate instead. They then took the educational history of each CEO in the sample and compared the years they graduated to the state of the economy at the time.

Even adjusting for firm size, industry, number of options granted and other factors, the researchers found that CEOs who graduated in the best economic times were about 30 percent more likely to falsify claims of stock option grants than those who graduated in the worst economic times. 

Click here to see more of the latest news from the NYSSCPA.