The Role of Accounting Conservatism in the Equity Market: Evidence from Seasoned Equity Offerings

2012 ◽  
Author(s):  
Yongtae Kim ◽  
Siqi Li ◽  
Carrie H. Pan ◽  
Luo Zuo
Keyword(s):  
Seasoned Equity Offerings ◽  
Equity Market ◽  
Accounting Conservatism ◽  
Equity Offerings

The Role of Accounting Conservatism in the Equity Market: Evidence from Seasoned Equity Offerings

2013 ◽  
Vol 88 (4) ◽  
pp. 1327-1356 ◽  
Author(s):  
Yongtae Kim ◽  
Siqi Li ◽  
Carrie Pan ◽  
Luo Zuo
Keyword(s):  
Negative Impact ◽  
Seasoned Equity Offerings ◽  
Equity Market ◽  
Accounting Conservatism ◽  
Data Availability ◽  
Equity Offerings ◽  
Market Reactions ◽  
Conservative Accounting ◽  
Financing Costs

ABSTRACT Using seasoned equity offerings (SEOs) from 1989 to 2008, we examine the role of accounting conservatism in the equity market. We find that issuers with a greater degree of conservatism experience fewer negative market reactions to SEO announcements. We further show that an important mechanism through which conservatism affects SEO announcement returns is by mitigating the negative impact of information asymmetry. Additional analyses suggest that our results are not driven by the effects of other forms of corporate governance. We also find evidence that conservative issuers continue to use conservative accounting after the equity offerings. Taken together, our findings are consistent with the argument that accounting conservatism reduces financing costs in SEOs. Data Availability: Data used in this study are available from public sources identified in the study.

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.

The Role of Internal Control in the Equity Issue Market: Evidence From Seasoned Equity Offerings

2015 ◽  
Vol 32 (3) ◽  
pp. 303-328 ◽  
Author(s):  
Xinghua Gao ◽  
Yonghong Jia
Keyword(s):  
Internal Control ◽  
Risk Premium ◽  
Dominant Role ◽  
Seasoned Equity Offerings ◽  
Equity Capital ◽  
Equity Offerings ◽  
Equity Issue ◽  
Sarbanes Oxley ◽  
The Cost

This article examines the role of internal control requirements under the Sarbanes–Oxley (SOX) Act of 2002 in firms’ cost of raising equity capital. We find that, prior to the disclosure of internal control weaknesses (ICWs), ICWs are not directly associated with underwriters’ gross spread and seasoned equity offering (SEO) underpricing. After the disclosure, however, underwriters charge a risk premium on ICW issuers, especially on those disclosing ICWs in multiple consecutive years. We also find that SEO underpricing is exacerbated by multiple-year-disclosed ICWs but not by first-timers. More notably, we find that managers play a dominant role in deciding issue size pre-disclosure, but this dominance weakens post-disclosure. Taken together, our evidence suggests that internal controls help moderate the cost of raising equity capital and that ICW disclosures have significant implications for underwriters in the equity issue market.

scholarly journals PENGARUH KONSERVATISME AKUNTANSI TERHADAP ABNORMAL RETURN SAHAM PADA SAAT PENGUMUMAN SEASONED EQUITY OFFERINGS

MODUS ◽  
2016 ◽  
Vol 27 (1) ◽  
pp. 77
Author(s):  
Vinny Violetta ◽  
Jenjang Sri Lestari
Keyword(s):  
Stock Returns ◽  
Abnormal Return ◽  
Stock Exchange ◽  
Seasoned Equity Offerings ◽  
Accounting Conservatism ◽  
Equity Offerings ◽  
Control Variables ◽  
Abnormal Stock Returns

This study aims to determine the efect of conservatism against abnormal stock returns during the announcement of Seasoned Equity Oferings (SEO) companies listed on the Stock Exchange. Tis study was conducted to see the efect of accounting conservatism towards abnormal return during the announcement of SEO. Tis study also uses the control variables of size and leverage. The sample in this company using the 39 companies listed on the Stock Exchange and ofering additional shares during 2011-2013. Results from the study showed that conservatism has a signifcant positive efect on abnormal stock returns during the announcement of SEO. Control variables leverage signifcant negative efect on abnormal stock returns during the announcement of SEO. While size has no efect on abnormal stock returns during the announcement of SEO.Keywords: abnormal return, conservatism, leverage, seasoned equity ofering

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