Valuation, Earnings Management and the Underperformance of Loss Seasoned Equity Offerings
Keywords:
Accounting, Finance, Equity, Earning ManagementAbstract
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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