Investors–watch out for penny-stock ‘wolves’

http://www.ibj.com/articles/49058-kim-investors-watch-out-for-penny-stock-wolves

Posted by M Laavanya, Year 3 undergrad at the School of Accountancy, Singapore Management University

Kim: Investors–watch out for penny-stock ‘wolves’

August 16, 2014, Mickey Kim

Martin Scorsese’s 2013 “The Wolf of Wall Street,” based on convicted stock swindler Jordan Belfort’s memoir of the same name, made an over-the-top spectacle of the debauchery at Belfort’s “boiler-room” brokerage, Stratton Oakmont. The film also provided a rudimentary portrayal of how its “pump-and-dump” fraud was perpetrated on unwary investors. Continue reading

Advertisements

Voluntary Disclosure, Manipulation, and Real Effects

http://eds.a.ebscohost.com.libproxy.smu.edu.sg/eds/pdfviewer/pdfviewer?sid=f56a8be1-342e-4b26-b525-eaa5e0cdd7a3%40sessionmgr4003&vid=1&hid=4202

Posted by M Laavanya, Year 3 undergrad at the School of Accountancy, Singapore Management University

Voluntary Disclosure, Manipulation, and Real Effects.

BEYER, ANNE GUTTMAN, ILAN

Journal of Accounting Research. Dec2012, Vol. 50 Issue 5, p1141-1177. 37p. 1 Diagram, 5 Graphs.

Abstract:

We study a model in which managers’ disclosure and investment decisions are both endogenous and managers can manipulate their voluntary reports through (suboptimal) investment, financing, or operating decisions. Managers are privately informed about the value of their firm and have incentives to voluntarily disclose information and manipulate their reports in order to obtain more favorable terms when issuing equity to finance a new profitable investment opportunity. The model shows that treating managers’ disclosure and investment decisions both as endogenous and allowing managers to manipulate their voluntary reports yields qualitatively different predictions from when the disclosure and investment decisions are considered separately and managers cannot engage in manipulation. The model predicts that managers’ disclosure strategy is sometimes characterized by two distinct nondisclosure intervals (contrary to traditional threshold equilibria of voluntary disclosure models) and that managers with intermediate news sometimes forego the new profitable investment opportunity. As such, the paper highlights the importance of considering the interdependencies between firms’ disclosure and investment decisions and provides new empirical predictions.