Quadrophobia - Stock Manipulation for the Pros.

Post #321,414 by Another Scott 2/13/10 12:54:17 PM Reply	Quadrophobia - Stock Manipulation for the Pros. Kevin Drum at Mother Jones: http://motherjones.c...manipulation-pros The Wall Street Journal has a fascinating little story today. A pair of Stanford researchers examined half a million earnings reports and concluded that companies routinely adjust their earnings upward. How did they figure this out? It turns out that a favored way of doing this is to use accounting adjustments to boost your earnings per share ever so slightly Â say, from 5.4 cents to 5.5 cents, which then gets rounded up to 6 cents. And a difference of a penny a share in the headline earnings number makes a noticeable difference in your stock price: [...] Someone wise once said something like: "Outcomes are determined by incentives." If EPS growth is rewarded above all else, then management makes decisions to increase EPS growth at the expense of all else. The system's working as designed - no matter who gets hurt in the process... :-/ Cheers, Scott.
Post #321,845 by mhuber 2/22/10 5:28:22 AM Reply	"Outcomes are determined by incentives" When I left the Big Corporate world, my company's big metric, what everybody got their bonus on, was RONA: Return On Net Assets. And sure enough, the company was dumping assets as fast as possible. Spawning little companies that used to be departments. The investor joke was that eventually the company would consist of an old lady crocheting one component of the old product line.
Post #321,853 by boxley 2/22/10 9:00:01 AM Reply	wow, you mean booking sales prior to the contract signing is being done for ulterior motives? whoda thunk it. Scott, have you every worked in or near company execs? If we torture the data long enough, it will confess. (Ronald Coase, Nobel Prize for Economic Sciences, 1991)

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