Option Backdating and Board Interlocks

Bizjak, John M.; Lemmon, Michael L.; Whitby, Ryan J.

doi:10.1093/rfs/hhn120

Cited by 375 publications

(176 citation statements)

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“…More recently, Heron and Lie (2007) and Narayanan and Seyhun (2006) provide evidence that firms backdate options, particularly before the Sarbanes–Oxley Act (SOX). Bizjak, Lemmon, and Whitby (2006) find that interlocking boards are positively related to backdating. Collins, Gong, and Li (2006) link backdating problems with weak corporate governance proxied by a CEO's influence over the board and compensation committee.…”

Section: Introductionmentioning

confidence: 76%

“…Collins, Gong, and Li (2006) document an association between weak corporate governance and backdating. Similarly, Bizjak, Lemmon, and Whitby (2006) find that interlocking boards play a significant role in the spread of backdating. Firms are more likely to engage in backdating behavior when they have outside directors linked to the firms that also backdate option grants.…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 86%

“…In Ryan and Wiggins (2004), 63% of the firms award options to directors. Most of the existing literature on option backdating (e.g., Bizjak, Lemmon, and Whitby 2006; Collins, Gong, and Li 2006) does not examine the role of director compensation in backdating activities. Directors are supposed to monitor management and prevent firms from committing non‐value‐enhancing activities.…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

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Backdating and Director Incentives: Money or Reputation?

Minnick

Zhao

2009

J of Financial Research

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We investigate how director incentives affect the occurrence of firms' backdating employee stock options. Directors with more wealth tied up in stock options may pursue activities that lead to personal gain, such as option backdating, which potentially increases the option recipient's compensation. We document a positive and significant association between director option compensation and the likelihood that firms backdate stock options. Our results question the effectiveness of director option compensation in aligning the interests with those of shareholders and help to explain the recent decline in the use of director option grants by many firms. Copyright (c) 2009 The Southern Finance Association and the Southwestern Finance Association.

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Section: Introductionmentioning

confidence: 76%

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 86%

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

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Backdating and Director Incentives: Money or Reputation?

Minnick

Zhao

2009

J of Financial Research

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“…As expressões Board Interlocking (Santos & Silveira, 2007;Bizjak, Lemmon & Whitby, 2009;Silva, 2010;Connelly & Slyke 2012), interlocking directorship (Zajac, 1988;Hung, 1998;Au;Peng & Wang, 2000), board network (Battiston, Weisbuch & Bonabeau, 2003;Kim, 2005), director interlocks (Hauschild & Beckman, 1998) e interlocking directorates (Dooley, 1969;Ornstein, 1982) têm sido utilizadas na literatura financeira para definir ligações entre empresas por meio de Conselho de Administração.…”

Section: Caracterização Do Board Interlockingunclassified

Determinantes da formação de board interlocking no mercado de capitais brasileiro

Ribeiro

Colauto

Clemente

2016

REPEC

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Este artigo tem como objetivo identificar os principais determinantes para a formação de board interlocking no mercado de capitais brasileiro. Como estrutura teórica utiliza a Teoria da Agência e Governança Corporativa, Teoria da Dependência dos Recursos e Conselho de Administração e a Caracterização do Board Interlocking. A amostra compreende 58 empresas brasileiras que participam do Índice Bovespa (Ibovespa). O estudo classifica-se como empírico-analítico. Em relação aos objetivos caracteriza-se como exploratória, quanto aos procedimentos trata-se de uma pesquisa documental. Os dados sobre os Conselhos de Administração foram coletados por meio dos Formulários de Referência, disponibilizados no website da Bolsa de Valores de São Paulo (BM&FBOVESPA). Os resultados encontrados demonstram que a presença de board interlocking é generalizada nessas empresas e normalmente está associada a quatro fatores: (1) formação do grupo econômico; (2) controle governamental; (3) formação de fundos de pensão; e (4) presença de profissionais com reconhecida experiência de mercado. Os resultados também sugerem que os três primeiros fatores originam ligações mais duradouras e dificilmente tais conexões são rompidas. Por outro lado, as ligações realizadas por meio de profissionais com experiência de mercado tendem a ser mais instáveis por ser a presença de tais profissionais muito requisitadas no conselho de diferentes companhias.

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“…Fan et al [14] presents a data mining based automatic trading surveillance system for large data with skewed distribution using multiple classifiers. Bizjak et al [15] document the network structure in the interlocking board of directors to explain how inappropriately backdating compensation spreads. Adamic et al [16] construct and analyze a series of trading networks from transaction-level data, and determine that properties of trading networks are strongly correlated with transaction prices, trading volume, inter-trade duration, and measures of market liquidity.…”

Section: Related Workmentioning

confidence: 99%

Inside insider trading

Tamersoy

Xie

Lenkey

et al. 2013

Proceedings of the 2013 IEEE/ACM International Conference on Advances in Social Networks Analysis and Mining

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How do company insiders trade? Do their trading behaviors differ based on their roles (e.g., CEO vs. CFO)? Do those behaviors change over time (e.g., impacted by the 2008 market crash)? Can we identify insiders who have similar trading behaviors? And what does that tell us?This work presents the first academic, large-scale exploratory study of insider filings and related data, based on the complete Form 4 fillings from the U.S. Securities and Exchange Commission (SEC). We analyzed 12 million transactions by 370 thousand insiders spanning 1986 to 2012, the largest reported in academia. We explore the temporal and network-centric aspects of the trading behaviors of insiders, and make surprising and counter-intuitive discoveries. We study how the trading behaviors of insiders differ based on their roles in their companies, the transaction types, the company sectors, and their relationships with other insiders.Our work raises exciting research questions and opens up many opportunities for future studies. Most importantly, we believe our work could form the basis of novel tools for financial regulators and policymakers to detect illegal insider trading, help them understand the dynamics of the trades and enable them to adapt their detection strategies towards these dynamics.

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Option Backdating and Board Interlocks

Cited by 375 publications

References 29 publications

Backdating and Director Incentives: Money or Reputation?

Backdating and Director Incentives: Money or Reputation?

Determinantes da formação de board interlocking no mercado de capitais brasileiro

Inside insider trading

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