The Number: How the Drive for Quarterly Earnings Corrupted Wall Street and Corporate America

This book documents the history of "the number" and provides invaluable insights into what pumped up the bull market of the 1990s. The "number" is the Earnings Per Share (EPS) valuation included in the quarterly financial statements issued by publicly traded U.S. companies. The author documents the background of key players involved in putting out the quarterly EPS and explains why quarterly reporting in the boom market years seemed more akin to racing sheets than any serious analysis of corporate performance. He provides a broad historical perspective of the changes in the investment community and the way markets have been evaluated since quarterly reporting was first imposed by the SEC in 1934 as a preventative step against the reccurrence of a crash like that of 1929. Since that time such things as the influence of independent stock research, the removal of fixed commissions on trades, and the increased prominence of options in compensation have contributed to increased deviancy in corporate reporting. In the end, the author concludes that companies and the investment community have to come to terms with the fact that "the number is nothing more than an assumption." There's no quick panacea to evaluating corporate performance. EPS is only one of many useful tools that can be used; to rely on it or any other singular figure exclusively can lead to trouble.