Here's the conundrum about backdating. Everyone knows it's cheating shareholders. That's why it's been compared to betting on yesterday's horse races.

But unlike other types of fraud, it doesn't involve hiding liabilities and over-stating earnings. Asset values are not artificially inflated. Therefore, it can be argued that backdating itself would have little or no impact on shareholder wealth.

But according to academics from the University of Miami and University of Rochester, it has a very significant impact.

According to their study The Impact of the Options Backdating Scandal on Shareholders' Wealth, the researchers found that there was damage regardless of direct cash flow consequences. They examined 130 companies named by The Wall Street Journal as being under investigation for options backdating, or that had publicly admitted to it. The stock price losses averaged at least 20 per cent per firm.

The stock price was also influenced by institutional shareholders reducing their holdings in allegedly backdating firms after the revelations of misdeeds. The threat of litigation doesn't help either.

As a result of this, and the negative publicity impairing the credibility and reputations of the companies' executives and directors, the share price starts sliding.

Therefore, the question of whether the company has actually lost money is irrelevant.

"These stock price losses imply that shareholders have lost hundreds of millions of dollars coincident with the disclosures of option-backdating news,'' the study says.

"Clearly, this large decline in shareholder wealth is many times greater than any reasonable estimate of the ill-gotten gains to executives or the out-of-pocket losses to firms.''