Professors have long been friends to U.S. securities regulators, uncovering suspicious trading and accounting patterns that have led to multimillion-dollar settlements.
These researchers are about to get a new tool to help them find a treasure trove of easily accessible information to comb through, and which could lead to more enforcement actions against companies in the United States.
The U.S. Securities and Exchange Commission recently proposed a timetable requiring about 500 of the largest public companies to begin filing their financial data in extensible business reporting language, known as XBRL, in early 2009. Smaller companies would get an extra year or two to get ready.
XBRL tags are like bar codes attached to each piece of financial data. The data can be downloaded to spreadsheets or accessed with an online viewer that allows users to easily find and compare crucial company data.
Corey Booth, chief information officer for the SEC, said that analysis of the XBRL data of companies could uncover suspicious activities.
“It stands to reason that when you have that much more data available, it will produce more insight and some very interesting findings pertinent to us,” Booth said.
Recent high-profile SEC cases involving the backdating of stock options were set off by academic researchers examining corporate data.
Professors at the University of Iowa and Indiana University spent months poring over data from SEC documents and found that many options grants were timed to exploit marketwide price depressions that not even insiders could predict, indicating that at least some of the grants must have been backdated.
As a result, hundreds of companies were investigated by the SEC or conducted their own internal inquiries.
Marvell Technology and Broadcom agreed this year to pay $10 million and $12 million, respectively, to settle backdating cases.
Randy Heron, a finance professor at Indiana University who co-authored the research, said the new…