Erik Lies paper, titled On the Timing of CEO Stock Option Awards, as published in...
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Accounting
Erik Lies paper, titled On the Timing of CEO Stock Option Awards, as published in Management Science in 2005, documents that, relative to the reported dates of CEO stock option awards, the predicted returns are abnormally low before the awards and abnormally high afterward. Required (a) Please explain why this documented phenomenon is strongly suggestive of stock option backdating. (10 marks) (b) Please discuss why the revelation of stock option backdating may have a negative impact on a firms valuation. (10 marks)
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