Studies have shown that when one company manipulated its earnings, its industry peers soon followed suit. Furthermore, directors who serve on multiple boards tend to spread earnings misstatements from company to company.

Why are earnings misstatements so contagious? Learn why these misstatements occur and warnings signs of when a company may be likely to partake in the manipulation of earnings in this special report.

Get this special report, “Warning Signs of Earnings Manipulation” for only $9.99.

*This report is free to all Professional & Institutional members.

Photo Credit: Peter Reed (Flickr)

    2 replies to "Why Earnings Manipulation Is Highly Contagious"

    • John

      What a great article! Thanks for the heads up on O&G.

      Figure 1 is showing a divergence between market value and economic book value. Wonder if this could be a catalyst for an attempt to drive increased market value by elevating hidden gains, given that the divergence could create angst (uncertainty). Again, thanks for the article.

    • John

      Another thought…Economic book value (EBV) basically flattening after peaking in 2012. Headwinds on WACC component of EBV if rates increase (noted if increase is slow, WACC increases slowly over time). Still a headwind that is exacerbated by a period of cost/labor-expense cutting that is coming to and end and will no longer be a lever to pull to drive EBV upwards. Companies will now need to invest and try to drive revenue through those investments and increased marketing for longer-term EBV growth, IMHO.

Leave a Reply

Your email address will not be published.