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Option Backdating and Board InterlocksJohn M. BizjakTexas Christian University Michael L. LemmonUniversity of Utah - Department of Finance Ryan J. WhitbyUtah State University February 1, 2007 Review of Financial Studies, Forthcoming Abstract: We examine the role of board connections in explaining how the controversial practice of backdating employee stock options spread to a large number of firms across a wide range of industries. The increase in the likelihood that a firm begins to backdate stock options that can be explained by having a board member who is interlocked to a previously identified backdating firm is approximately one third of the unconditional probability of backdating in our sample. Our analysis provides new insight into how boards function and the role that they play in providing managerial oversight and determining corporate strategy.
Number of Pages in PDF File: 42 Keywords: corporate governance, board of directors, stock options, backdating JEL Classification: G34, J33, H24, H25 working papers seriesDate posted: November 24, 2006 ; Last revised: March 20, 2012Suggested CitationContact Information
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