Toshiba Corp, the Japanese based electronics manufacturer , recently had their CEO Hisao Tanaka resign from his position. This was all a result of a financial accounting scandal which reported that Toshiba’s earnings we hugely inflated. This is one of the biggest account scandals to ever take place in Japan. Toshiba stated that their profits since 2008 make up 151.8 billion yen ($122 billion).
The issue with this scandal is pretty straight forward. If you inflate your yearly earnings, you are tricking the market into believing that your company is worth something that it’s not. Not only will this damage the company’s earnings, it will ruin there reputation, preventing them from gaining support in the future.
Interestingly enough, despite Tanaka’s resignation, the company’s stock has gone up 6%. I find Toshiba to be very lucky that a scandal like this has not scared away investors. With regards to their consumer’s interest, I hope that Toshiba is able to maintain it’s growth in the stock market, hopefully benefiting the economy.
-Timmy Drabble
Reference:Toshiba just lost its CEO to a huge accounting scandal