Why do companies feel the need to falsify financial statements?  Jennifer Yip states that Olympus’ accountant’s motive was to “hide the company’s huge financial losses from investors.”  This effectively leads to a question:  Are investors then not “on the folly of rewarding A while hoping for B“?

Investors search for companies in appealing financial positions to place their funds in.  At the same time, companies are aware that they will only attract investors with a promising financial position.  As a result, companies fabricate healthy financial statements, and investors, ultimately hoping for high ROI, then invest in the wrong businesses.

Yip recognized that the recent unveiling of Olympus’ fraud may lead to the fall of Olympus despite its past success.  Declining stock prices diminish the value of investors’ company shares.  This further illustrates how investors have fostered an outcome completely opposite to what they desire.

Works  Cited

Kerr, Steven. “On the Folly of Rewarding A. While Hoping for B.” Academy of Management Executive, 1995 Vol. 9 No. 1. : Academy of Management, 10 Nov. 2013.

Yip, Jennifer.  “Olympus Financial Fraud.” Jennifer Yip’s Blog. UBC Blogs, 06 Oct 2013. Web. 10 Nov. 2013.

“How do Companies use Mergers and Acquisitions to manipulate financial statements?”  Stock Shastra.  Accord Fintech Pvt. Ltd., 15 Mar. 2011. Web. 10 Nov. 2013.