The comprehensive survey reported here allowed analysis of how senior U.S. financial executives make decisions related to performance measurement and voluntary disclosure. Chief financial officers were asked what earnings benchmarks they cared about and which factors motivated executives to exercise discretion—even sacrifice economic value—to deliver earnings. These issues are crucially linked to stock market performance. The results show that the destruction of shareholder value through legal means is pervasive, perhaps even a routine way of doing business. Indeed, the amount of value destroyed by companies striving to hit earnings targets exceeds the value lost in recent high-profile fraud cases.

Author Information

John R. Graham is the D. Richard Mead, Jr., Family Professor of Finance in the Fuqua School of Business at Duke University, Durham, North Carolina.

Campbell R. Harvey is the Paul Sticht Professor of International Business in the Fuqua School of Business at Duke University, Durham, North Carolina.

Shiva Rajgopal is the Herbert Whitten Professor of Accounting at the University of Washington, Seattle.

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