Valuation, Earnings Management and the Underperformance of Loss Seasoned Equity Offerings

Authors

  • Tatiana Fedyk University of San Francisco
  • Fernando Comiran University of San Francisco
  • Joohyung Ha University of San Francisco

Keywords:

Accounting, Finance, Equity, Earning Management

Abstract

The current literature on earnings management around seasoned equity offerings (SEOs) mainly concentrates on discretionary accruals, and considers all SEOs as a homogenous pool of firms. The uniqueness of this paper is in linking firms’ valuation to their discretionary choices and by demonstrating that loss firms do not manage earnings during SEOs as earnings are not informative for their valuation. We find that loss firms overinvest in R&D around SEOs, because R&D expenditures are the main valuedriver for loss SEOs. We further show that overinvestment in R&D is negatively associated with future operating performance for loss firms.

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Published

2019-03-12

How to Cite

Fedyk, T., Comiran, F., & Ha, J. (2019). Valuation, Earnings Management and the Underperformance of Loss Seasoned Equity Offerings. Journal of Accounting and Finance, 16(3). Retrieved from https://articlegateway.com/index.php/JAF/article/view/1019

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Section

Articles