This loss of confidence was manifested in Congressional hearings and an intensified media spotlight.At the same time, the SEC’s Inspector General has issued a number of reports critical of the agency, and Congress intensified pressure on the SEC and Department of Justice to bring cases in the wake of the financial crisis.
retention, incentives, attraction of talent) and with reference to the behavior of peer firms.
We focus on the role that director interlocks played in contributing to the spread of backdating since the board of directors has primary authority over the level and structure of executive compensation, including determination of the amount and timing of option grants.
We find strong evidence that board interlocks are related to the spread of backdating.
The fact that commonality in auditor choice and geographic location is associated with the initiation of backdating suggests that other linkages between firms beyond those created through board interlocks may also play a role in facilitating the spread of this practice.
In contrast to some earlier research, we find little evidence that other measures of the quality of corporate governance, such as institutional ownership, board size, board independence, and whether the CEO is also the chair of the board, are systematically related to the incidence of backdating. , we analyze the excess returns that occurred in short windows surrounding ten distinct news events related to backdating of stock option grants.