Comverse technology backdating
To the extent that companies comply with this new regulation, backdating should be greatly curbed.
Unless corporate insiders can predict short-term movements in the stock market, my results provided further evidence in support of the backdating explanation.Because the option value is higher if the exercise price is lower, executives prefer to be granted options when the stock price is at its lowest.Backdating allows executives to choose a past date when the market price was particularly low, thereby inflating the value of the options.In a second study forthcoming in the Journal of Financial Economics (available at Randy Heron of Indiana University and I examined the stock price pattern around ESO grants before and after a new SEC requirement in August of 2002 that option grants must be reported within two business days.The graph below shows the dramatic effect of this new requirement on the lag between the grant and filing dates.
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A particularly interesting example is that of Micrel Inc.