The literature in financial economics provides convincing evidence of retroactive timing of executive stock option grants (option “backdating”). However, the literature does not yet contain a methodology for detecting backdating at individual companies. The present paper seeks to fill this gap. Specifically, it describes a rigorous statistical test for backdating based on publicly available data. In addition, it identifies a flaw in the methodology employed by the Wall Street Journal (Forelle and Bandler, 2006) to calculate the odds that the timing of executive stock option grants was purely random, and it provides experimental evidence that this flaw could in practice distort the assessment of odds.

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