Definition of 'Financial Shenanigans'
Acts or actions designed to mask or misrepresent the true financial performance or actual financial position of a company or entity. Financial shenanigans can range from relatively minor infractions involving creative interpretation of accounting rules to outright fraud over many years. In almost every instance, the revelation that a company’s stellar financial performance has been due to financial shenanigans rather than management prowess will have a calamitous effect on its stock price and future prospects. Depending on the scale and scope of the shenanigans, the repercussions can range from a steep sell-off in the stock to the company’s bankruptcy and dissolution.
Investopedia explains 'Financial Shenanigans'
Financial shenanigans can be broadly classified into two types:
In the United States, 2001-02 saw the unearthing of a significant number of financial shenanigans at companies such as Enron, WorldCom and Tyco. Enron and WorldCom’s senior-most executives pushed their companies into bankruptcy and paid the price by getting jail time. The spate of corporate skullduggery during this period led to the passage of the Sarbanes-Oxley Act in July 2002, which set new and enhanced standards for all U.S. public company boards, management and public accounting firms.