Title: Stock option fraud detection and an analysis for its reasons: Arabic Republic of Egypt case

Authors: Zakia M. Alaa Eldeen; Ahmed F. Elbayoumi

Addresses: Management Sciences Department, Akhbar El Yom Academy, The Fourth Industrial Zone, 6th of October City, Arabic Republic of Egypt ' Accounting Department, Faculty of Commerce, Cairo University, P.O. Box 12613, Giza, Arabic Republic of Egypt

Abstract: This paper investigates how stock option turned from an incentive for good management to a tool of management fraud. The objective of this paper is accomplished through studying the stock option phenomenon in the Arab Republic of Egypt (ARE). Stock option grants data are obtained from all firms that have stock option grants and listed in the Egyptian stock market. The empirical study covers the period from 2006 through 2009. Detecting stock option fraud and distinguishing between control and fraud firms was done through calculating the cumulative abnormal returns before and after stock option grants. Results of this research reveal that the incidence of stock option fraud is higher in unscheduled option grants compared to scheduled ones. These results strongly support that the reason of stock option fraud in ARE is dating games rather than news announcements manipulation.

Keywords: executive compensation; stock options; stock option fraud; scheduled option grants; unscheduled option grants; fraud companies; control companies; Egypt; fraud detection; stock option grants.

DOI: 10.1504/IJEA.2013.055168

International Journal of Economics and Accounting, 2013 Vol.4 No.2, pp.123 - 137

Published online: 29 Apr 2014 *

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