June 2007 Vol. 105 No. 8 THE REVIEW
ARTICLES

The Economic Impact of Backdating of Executive Stock Options

M. P. Narayanan, Cindy A. Schipani, & H. Nejat Seyhun

This Article discusses the economic impact of legal, tax, disclosure, and incentive issues arising from the revelation of dating games with regard to executive option grant dates. It provides an estimate of the value loss incurred by shareholders of firms implicated in backdating and compares it to the potential gain that executives might have obtained through backdating. Using a sample of firms that have already been implicated in backdating, we find that the revelation of backdating results in an average loss to shareholders of about seven percent. This translates to about $400 million per firm. By contrast, we estimate that the average potential gain from backdating to all executives in these firms is about $500,000 per firm annually. We suggest some remedies not only for backdating, but also for other dubious practices such as springloading.

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Fixing 404

Joseph A. Grundfest & Steven E. Bochner
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Rewarding Outside Directors

Assaf Hamdani & Reinier Kraakman
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The Corporate Monitor: The New Corporate Czar?

Vikramaditya Khanna & Timothy L. Dickinson
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SOX and Whistleblowing

Terry Morehead Dworkin
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A Business Ethics Perspective on Sarbanes-Oxley and the Organizational Sentencing Guidelines

David Hess
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The Social Construction of Sarbanes-Oxley

Donald C. Langevoort
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Sarbanes-Oxley and the Cross-Listing Premium

Kate Litvak
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Getting the Word Out about Fraud: A Theoretical Analysis of Whistleblowing and Insider Trading

Jonathan Macey
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The Use of Effficient Market Hypothesis: Beyond SOX

Dana M. Muir & Cindy A. Schipani
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What's Good for the Goose Is Not Good for the Gander: Sarbanes-Oxley-Style Nonprofit Reforms

Lumen N. Mulligan
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NOTES

When Courts Shouldn't Take the Initiative: Section 2 of the Voting Rights Act, Initiative Petitions, and Operation King's Dream

Francesca Ambrosio

Well after the end of the Civil War, the abolition of slavery, and the passage of the Fifteenth Amendment, many African Americans were still unable to effectively exercise their right to vote. Finally, in 1965, Congress sought to remedy this situation by passing the Voting Rights Act (“VRA”). The bill was dramatic and controversial, but commentators hail it as one of the most effective pieces of legislation of the civil rights movement.

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Now, Later, or Never: Applying Assymetric Discount Rates in Nuisance Remedies and Federal Regulations

Yang Wang
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Secondhand Smoke Signals from Prison

Scott C. Wilcox
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