Electronic Theses and Dissertations

Identifier

1261

Date

2014

Date of Award

11-21-2014

Document Type

Dissertation

Degree Name

Doctor of Philosophy

Major

Business Administration

Concentration

Finance

Committee Member

Sandra c Mortal

Committee Member

David M. Kemme

Abstract

This dissertation comprises two essays. In the first essay we show that accruals management, sales manipulation, and reckless growth in operating capacity are used in conjunction with forward splits by hundreds of firms in schemes to manipulate stock prices that help justify an average 32% increase in executives’ salaries and additional gains from aggressive stock sales. This is a path to destruction that ultimately leads to shedding of labor and physical assets and substantial declines in both return on assets and stock price that often necessitates a reverse stock split. Our results highlight agency problems in the context of deceptive stock splits that can be part of complex financial chicanery.In the second essay we show that during 2000-2004 Doral Financial Corporation, a leading banking holding company, overstated its pre-tax income by 100 percent, which enabled Doral to report 28 consecutive quarters of record earnings. Our results show that the proportion of equity related incentives and the timing of option grants likely played a significant role in prompting Doral’s earnings misstatements. After the restatement announcement, Doral’s new management adopted several corporate governance improvements such as increasing the board size and independence and separating the chair and CEO roles. However, these actions were not sufficient to restore Doral’s pre-restatement good reputation.

Comments

Data is provided by the student.

Library Comment

dissertation or thesis originally submitted to the local University of Memphis Electronic Theses & dissertation (ETD) Repository.

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