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  • Writer's pictureKirk Hartley

Companies are Not Islands – “It’s Not Just Your Accounting Fraud”

Companies are not islands. Mistakes or fraud by company X may drag down prices of most or all companies in that sector. This valuable point is highlighted by a new post at Conglomerate, titled "It’s Not Just Your Accounting Fraud."

The relevant point here is that frauds can include failure to disclose contingent liability risks. In the early 2000s, multiple companies saw massive stock price reductions because of asbestos litigation they failed to fully investigate, understand and disclose. The worst offenders pulled down others. For a reminder of an egregious example of stock price plunges, see this article on Halliburton’s woes in the early 2000s. And of course, Halliburton’s issues continue to play out as the case goes back to SCOTUS on the "fraud on the market" issue.

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