Largest Shareholder Ownership and Downward Real-activity Earnings Management in Korean Seasoned Equity Offerings Firms

2018 ◽  
Vol 47 (4) ◽  
pp. 546-570 ◽  
Author(s):  
Su-In Kim ◽  
Jin-Ho Byun ◽  
Hye-Jeong Shin
Keyword(s):  
Earnings Management ◽  
Seasoned Equity Offerings ◽  
Equity Offerings ◽  
Real Activity

scholarly journals The Effect of Analyst Coverage on the Relationship between Seasoned Equity Offerings and Investment Efficiency From Korea

2018 ◽  
Vol 10 (8) ◽  
pp. 2704 ◽  
Author(s):  
Hyun Oh ◽  
Woo Kim
Keyword(s):  
Earnings Management ◽  
Significant Negative Correlation ◽  
Seasoned Equity Offerings ◽  
Investment Efficiency ◽  
Allocation Of Resources ◽  
Equity Offerings ◽  
Efficient Operation ◽  
Analyst Coverage ◽  
External Auditor ◽  
The Relationship

In order for a firm to remain sustainable, it must establish a strategy that is appropriate to its changing environment. One of these strategies is that the procurement of capital and the efficient operation of the procured capital are directly linked to the sustainability of the firm. This study empirically analyzes the relationship between seasoned equity offerings (hereafter SEO) and investment efficiency. We examine the investment efficiency of firms that have SEO and those that do not, and then analyze the effect of analysts on the relationship between SEO and investment efficiency. The empirical results of this study are as follows. First, there is a significant negative correlation between SEO and investment efficiency, meaning that firms with SEO have lower investment efficiency than firms without SEO. Second, the interaction variable between SEO and analyst participation showed a significant positive correlation with investment efficiency, meaning that the more active the analyst, the more any ineffective investment that is derived from managers’ opportunistic earnings management is suppressed. The results show that the efficient operation of procured capital is important for the sustainability of the firm, and that the analyst plays an important role in monitoring the efficient allocation of resources as an external auditor.

Large institutional investors and the pressure to manage earnings surrounding seasoned equity offerings

2019 ◽  
Vol 61 (2) ◽  
pp. 402-420
Author(s):  
Mouna Njah ◽  
Raoudha Trabelsi
Keyword(s):  
Earnings Management ◽  
Institutional Investors ◽  
Information Quality ◽  
Management Practices ◽  
Seasoned Equity Offerings ◽  
Equity Offerings ◽  
Content Type ◽  
Multivariate Tests ◽  
Regulated Firms ◽  
Investor Activism

Purpose The purpose of this paper is to investigate the monitoring role exerted by large institutional investors and their ability to restrict the earnings management practices conducted around seasoned equity offerings (SEOs). Design/methodology/approach The sample includes 130 French SEOs by non-regulated firms during 2004-2015. The authors used various cross-section, univariate and multivariate tests using several proxies for earnings management. They attempt to highlight that firms issuing SEOs are more able to manage earnings around SEOs owing to the predominance of large speculative institutional investors. Noteworthy, the monitoring role exerted by sophisticated institutional investors turns out to restrict the earnings management opportunities surrounding a SEOs event. Findings The results show that the issuing firms tend to manipulate earnings in an upward trend with respect to the year preceding the SEO offer. Thus, a special attention has been drawn on the fact that the issuing companies strive to prove their ability to manage earnings around SEOs in presence of large speculative institutional investors. Practical implications The results provide useful insights into the role different types of institutional investors play in terms of enhancing both governance and accounting information quality. Originality/value This paper adds to the literature questioning the evidence that institutional investor activism frequently engage in misleading earnings management around corporate events. The authors provide an alternative explanation for earnings management around SEOs in the French context.

The effect of the need for subsequent seasoned equity offerings on earnings management motivation

2019 ◽  
Vol 18 (1) ◽  
pp. 25-52
Author(s):  
Guannan Wang ◽  
Moshe Hagigi
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Seasoned Equity Offerings ◽  
Common Stock ◽  
Equity Offerings ◽  
Content Type ◽  
Equity Issues ◽  
Total Magnitude ◽  
Prior Literature ◽  
Reported Earnings

PurposeMost prior literature focuses on how managers’ immediate needs affect their current earnings management. The purpose of this paper is to expand this body of literature by investigating the managerial motivation in a multi-period setting. The authors believe that managers’ incentive to engage in earning management around current equity issues is not only determined by the companies’ immediate need, but that it is also determined by their longer-term financing need.Design/methodology/approachThe authors examine all issuances of common stock, whether they are issued as seasoned equity offerings or whether as a reissuance of previously repurchased stock. They believe that the motivations for earnings management are similar for all these various stock-issuance events, which result in an increase in the number of outstanding common stock items.FindingsThe results of this paper reveal that those firms with less of a need for subsequent equity issuances are more likely to engage in “income- increasing” earnings management before their equity issuances. Conversely, equity issuers with more of a need for subsequent equity issuances would be more concerned about the potential impact of current earnings management on their future reported earnings and, therefore, would be less likely to manage earnings.Originality/valueThis paper contributes to the literature by extending the findings of the prior literature, showing that managerial discretion does not only affect the total magnitude of earnings management, but that it also impacts the timing of the earnings management activities. Insights gained from our research may contribute to the literature and enable a better understanding of firms’ financial reporting strategy from a longer-run view.

scholarly journals DETEKSI MANAJEMEN LABA MELALUI PERBEDAAN NILAI ABSOLUT AKRUAL DISKRESIONER SEPUTAR SEASONED EQUITY OFFERINGS

2018 ◽  
Vol 14 (1) ◽  
pp. 54
Author(s):  
Djaja Perdana
Keyword(s):  
Earnings Management ◽  
Management Practices ◽  
Discretionary Accruals ◽  
Seasoned Equity Offerings ◽  
Rank Test ◽  
Equity Offerings ◽  
Absolute Value ◽  
Discretionary Accrual ◽  
Signed Rank ◽  
Signed Rank Test

Abstrak: Deteksi Manajemen Laba Melalui Perbedaan Nilai Absolut Akrual Diskresioner Seputar Seasoned Equity Offerings. Penelitian ini bertujuan mendeteksi praktik manajemen laba pada perusahaan yang melakukan aksi Seasoned Equity Offerings. Pendeteksian manajemen laba dilakukan melalui pengujian perbedaan nilai absolut akrual diskresioner sebelum dan sesudah aksi Seasoned Equity Offerings (SEO).  Penelitian ini melibatkan total 201 data observasi dari 67 sampel perusahaan yang terdaftar di Bursa Efek Indonesia yang melakukan Seasoned Equity Offerings selama periode 2008-2013 dan dipilih melalui metode purposive random sampling serta menggunakan data Laporan Keuangan periode 2004-2016. Pengujian hipotesis menggunakan Wilcoxon Signed Rank Test. Penelitian ini menunjukkan bahwa terdapat perbedaan yang signifikan nilai absolut akrual diskresioner dalam informasi laba perusahaan antara sebelum dengan sesudah melakukan Seasoned Equity Offerings.  Nilai absolut akrual diskresioner sebelum Seasoned Equity Offerings lebih besar dibandingkan dengan sesudah Seasoned Equity Offerings. Hal ini menunjukkan terjadinya praktik manajemen laba sebagai dampak asimetri informasi antara manajemen perusahaan dengan investor. Kata kunci: Asimetri informasi, Manajemen Laba, Nilai Absolut Akrual Diskresioner, Seasoned Equity Offerings Abstract: Detecting Earning Managemeng by Examining the Changes in Absolute Value of Discretionary Accrual in Relation to Seasoned Equity Offerings. This study aims to detect earnings management practices in companies that perform Seasoned Equity Offerings. Earnings management is detected by examining the change of absolute value of discretionary accrual before and after Seasoned Equity Offerings (SEO). This study utilises 201 observation data from 67 IDX-listed companies which conducted Seasoned Equity Offerings during 2008-2013. The samples were selected by purposive random sampling method and using the data from Financial Report 2004-2016 period. The test was performed by using Wilcoxon Signed Rank Test. This study found the absolute value of discretionary accruals before Seasoned Equity Offerings is greater than after Seasoned Equity Offerings. These earnings management practices as impact of information asymmetry between management and investors. Keywords: Information Asymmetry, Absolute Value of Discretionary Accruals, Earnings Management, Seasoned Equity Offerings

scholarly journals The Relationship between Earnings Management and Equity Market Timing

2021 ◽  
Vol 25 (6) ◽  
Author(s):  
Matheus da Costa Gomes ◽  
João Paulo Augusto Eça ◽  
Marcelo Botelho da Costa Moraes ◽  
Maurício Ribeiro do Valle
Keyword(s):  
Earnings Management ◽  
Market Timing ◽  
Careful Analysis ◽  
Seasoned Equity Offerings ◽  
Equity Market ◽  
Net Income ◽  
Equity Offerings ◽  
The Relationship ◽  
Profitability Ratios ◽  
Equity Market Timing

ABSTRACT Objective: this study aims to verify if companies that practice equity market timing have higher earnings management levels around the stock issue period. Method: we used a sample of 68 seasoned equity offerings (SEOs) in Brazil from 2004-2015. First, we ranked the sample among companies that used market timing (timers) behavior in the SEOs and those that did not (non-timers). Second, we estimated each company’s earnings management levels by the Modified Jones and Modified Jones with ROA models. Finally, we tested the relationship between earnings management and equity market timing using a linear regression model. Results: the results show that the timers managed earnings more intensively in the quarters around SEOs than the non-timers. This happens to increase net income and consequently improve profitability ratios. Therefore, to explore opportunity windows, managers can inflate accounting profit through accruals and influence the market’s ability to correctly price shares. Conclusion: Brazilian companies practice earnings management as a way of exploiting opportunity windows in the stock market. The conclusion reinforces the need for a careful analysis of the company’s profits by investors, analysts, auditors, and regulators while allowing efforts to avoid such practices through compliance, governance, and regulation.

scholarly journals Earnings management and seasoned equity offerings: evidence from Taiwan started Go Incubation Board for Startup and Acceleration firms

2020 ◽  
Vol 17 (2) ◽  
pp. 183-197
Author(s):  
An-An Chiu ◽  
Shaio Yan Huang ◽  
Ling-Na Chen ◽  
Wei-Hua Lin
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Small And Medium Enterprises ◽  
Large Body ◽  
Seasoned Equity Offerings ◽  
Negative Consequences ◽  
Equity Offerings ◽  
Accounting Firms ◽  
Big 4 ◽  
Economic Journal

Although a large body of empirical research focuses on listed companies, less is done regarding small and medium enterprises. Under the authorities’ support, Taipei Exchange (TPEx) started Go Incubation Board for Startup and Acceleration Firms (GISA) in January 2014. This research yields insight into earnings management activities around seasoned equity offerings (SEO) based on GISA firms in Taiwan and the effectiveness of external corporate governance. Data for the study come from the GISA Market Observation Post System of TPEx and Taiwan Economic Journal. The results reveal that GISA firms with the incentives of raising funds are prone to upward accrual-based earnings management during SEO to avoid long-term negative consequences. Especially, firms with paid-in capital more than TWD (NT$) 30 million, higher fundraising amounts, or smaller-sized firms, tend to increase discretionary accruals. Finally, Certified Public Accountants (CPAs) and Big 4 accounting firms effectively serve as external corporate governance on mitigating earnings management. This study makes some contributions to GISA literature. First, expands the prior research, the different earnings management level before and listed on GISA, to the firms listed on GISA. Second, link up the relationship between the SEO and earnings management of GISA in Taiwan. Finally, it provides several contributions to regulators, for instance, the effectiveness of the counseling system provided by CPAs or Big 4 accounting firms. Also, the CPAs and Big 4 accounting firms serve as supervisors on corporate governance.

Asymmetric Monitoring of Quarterly Financial Statements by Big 4 Auditors and the SEC's Timely Review Requirement

2021 ◽  
Author(s):  
Carol Callaway Dee ◽  
Ayalew Lulseged ◽  
Tianming Zhang
Keyword(s):  
Earnings Management ◽  
Earnings Quality ◽  
Financial Statements ◽  
Seasoned Equity Offerings ◽  
Open Market ◽  
Equity Offerings ◽  
Audit Firm ◽  
Quarterly Earnings ◽  
Big 4 ◽  
Timely Review

We investigate if Big 4 firms are asymmetrically more effective than non-Big 4 firms in monitoring income-increasing vs. income-decreasing quarterly earnings management. We also study the Securities and Exchange Commission's (SEC) 2000 requirement that audit firm reviews of quarterly financial statements be completed prior to their filing with the SEC ("timely reviews"). We find Big 4 firms are more effective than non-Big 4 firms in curbing income-increasing earnings management around seasoned equity offerings (SEOs), but not income-decreasing earnings management around open market repurchases (OMRs). In the post-2000 period, after the SEC's mandate for timely reviews began, we find income-increasing earnings management around SEOs declined significantly, and this decline is primarily driven by the clients of Big 4 firms. We provide evidence that timely quarterly reviews improve earnings quality, especially when companies have incentives to engage in income-increasing accruals and are reviewed by Big 4 firms.

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