Friday, February 26, 2010

CEOs’ Stock Hedges May Be Buried in Footnotes

Carr Bettis, the co-founder of forensic accounting firm Gradient Analytics and co-author of a recent study on hedging, says that his research found that in the year after executives and directors had engaged in hedging, their company’s stock often dropped markedly and there was an increase in financial restatements and shareholder lawsuits. Bettis says that like other transactions, hedges must be reported on Form 4, but not in the two standard tables on the form. Instead, hedges are reported in footnotes, and he says details are often incorrectly reported or missing.

The study