Corporate Scandals Taking Toll On Markets
A major accounting firm convicted of obstructing justice. A leading brokerage caught misleading its clients. Imperious chief executives falling like flies. Huge corporations tumbling into bankruptcy. Business pages that read like the crime blotter.</br></br>Now, according to economists and market analysts, these still- unfolding corporate and accounting scandals have begun to weigh heavily on the stock market, the dollar and the U.S. economy. And the effects are likely to linger at least through the end of the year.</br></br>Just last night, WorldCom Inc. fired two executives and announced that it had mischaracterized expenses for more than a year, wiping out at least $1.6 billion in reported profits. Its shares, already below $1, plunged as low as 26 cents in after-hours trading.</br></br>"The economy and markets right now are in the midst of a full- blown corporate governance shock," said Stephen Roach, chief economist and resident pessimist at Morgan Stanley. "To presume somehow that it's over or the worst is behind us is naive."</br></br>Yesterday, the tech-laden Nasdaq composite and the much broader Standard & Poor's 500-stock indexes closed the day just a whisker above their low points after the Sept. 11 terrorist attacks, effectively wiping out the gains from last winter's rally. Analysts said the reversal reflects a growing skepticism among investors about the accuracy of corporate financial reports.