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A CEO who got options to buy 100,000 shares — which was common — could turn around and resell them for an immediate risk-free profit of 0,000.Revelations about backdating came to light in 2006 and sparked outrage on many fronts.So how did CEOs manage to manipulate stock prices so adroitly?Daines and his colleagues find evidence of several techniques, many of them tied to when companies decide to disclose important new information.

That’s a huge and timely swing for seemingly random fluctuations.In the 90 days after the option grant, however, the average stock generated an abnormal positive return of 1.1%. The V pattern turns out to get stronger at companies where CEOs have both more incentive and more opportunity to manipulate share prices.Overall, the researchers estimate, the “round trip” from the temporary dip through the rebound produced an abnormal positive return of about 2%. The V was deeper, for example, at companies that awarded above-average numbers of stock options and where top executives had more to gain.Sometimes, of course, a company can do both things in the same cycle.The researchers found concrete evidence for both bullet-dodging and spring-loading in corporate “8-K” disclosures, which companies are required to file when important new developments occur between regular quarterly reports.

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It’s been a decade since scores of corporations became embroiled in the “dating game” scandals over backdated CEO stock options, and most people thought that reforms in the aftermath ended the problem years ago. Daines of Stanford University, has unearthed a new and potentially more sinister version of the scheme — call it Dating Game 2.0 — that replaced the original.

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