An examination of potential backdating of executive share option grants in South Africa

Zheng, Fuling

An examination of potential backdating of executive share option grants in South Africa

Master Thesis

2007

Publisher

University of Cape Town

Department

Department of Finance and Tax

Faculty

Faculty of Commerce

Abstract

This study investigates whether executives backdate share option grants to their advantage in South Africa. Using data of 175 option grants to executives among the 41 top companies in South Africa between 2001 and 2006, a pattern of negative cumulative abnormal stock returns before the grant dates but positive and increasing returns thereafter is observed. This pattern is much more pronounced for unscheduled grants. Statistical testing shows the mean cumulative abnormal returns are significantly different from zero after the grant date, but are not significantly different from zero before the grant date. The mean differences in average cumulative abnormal stock returns between pre- and post- grant periods are significantly different. The results suggest that some opportunistic behavior might have taken place around the executive option grants, including backdating.

Description

Includes bibliographical references (pages 72-77).

Keywords

Financial Management

Reference:

Collections

Masters

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