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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.

About the Author(s)

John R. Graham
Campbell Harvey
Campbell R. Harvey

Campbell R. Harvey is professor of finance at Duke University and a research associate of the National Bureau of Economic Research in Cambridge, Massachusetts. He served as editor of the Journal of Finance from 2006 to 2012. In 2016, he was elected president of the American Finance Association.

Shiva Rajgopal PhD

Shiva Rajgopal is the Kester and Byrnes Professor of Accounting and Auditing at the Graduate School of Business, Columbia University. He is the incoming vice dean for research at the Columbia Business School. He is the recipient of the 2006 and 2016 American Accounting Association (AAA) Notable Contribution to the Literature award, the 2006 Best Paper award from Financial Accounting Research Section of the AAA, and the 2006 and 2016 Graham and Dodd Scroll Prize given by the Financial Analysts Journal. Professor Rajgopal is also the recipient of the 2008, 2012 and 2015 Glen McLaughlin Award for Research in Accounting Ethics. He is the departmental editor of the accounting track of management science and an associate editor at the Journal of Accounting and Economics. Professor Rajgopal is widely published in finance and accounting journals. His research is frequently cited in the popular press, including The Wall Street Journal, The New York Times, Bloomberg, Fortune, Forbes, Financial Times, Business Week, and The Economist.