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Does there prevail momentum in earnings management for seasoned equity offering firms?

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  • Chang, Chu-Hsuan
  • Lin, Hsiou-Wei William

Abstract

This study investigates the relationship between current and past period earnings manipulations for multiple seasoned equity offering (SEO) firms. These firms' discretionary accounting accruals (DAs) increase with the extent of cumulative prior DAs accompanying prior equity offers, consistent with the notion that prior earnings manipulators' continually inflate the earnings around SEOs. The prior manipulators appear to both engage in real activities as well as use accounting accruals to alter reported earnings. Nevertheless, the portfolio with the greatest allegedly cumulative manipulation and current income-increasing DAs in the issuance year generates significantly deteriorating post-issue stock returns.

Suggested Citation

  • Chang, Chu-Hsuan & Lin, Hsiou-Wei William, 2018. "Does there prevail momentum in earnings management for seasoned equity offering firms?," International Review of Economics & Finance, Elsevier, vol. 55(C), pages 111-129.
    • Handle: RePEc:eee:reveco:v:55:y:2018:i:c:p:111-129
    DOI: 10.1016/j.iref.2017.12.015
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    3. Chi Duong Thi, 2023. "Audit Quality, Institutional Environments, and Earnings Management: An Empirical Analysis of New Listings," SAGE Open, , vol. 13(2), pages 21582440231, June.
    4. Dutta, Shantanu & Fuksa, Michel & Macaulay, Ken, 2019. "Determinants of MD&A sentiment in Canada," International Review of Economics & Finance, Elsevier, vol. 60(C), pages 130-148.
    5. Zhang, Yuyang & Uchida, Konari & Dong, Liping, 2020. "External financing and earnings management: Evidence from international data," Research in International Business and Finance, Elsevier, vol. 54(C).

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    More about this item

    Keywords

    Discretionary accruals; Earnings management; Real earnings management; Seasoned equity offerings; Sequential stock offerings;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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