Managing for the Moment: The Role of Earnings Management via Real Activities versus Accruals in SEO Valuation

Autor:	S.P. Kothari, Sugata Roychowdhury, Natalie Mizik
Rok vydání:	2015
Předmět:	Economics and Econometrics 050208 finance Actuarial science Accrual 05 social sciences 050201 accounting Seasoned equity offering Valuation (logic) Moment (mathematics) Earnings management Accounting 0502 economics and business Business Finance
Zdroj:	The Accounting Review. 91:559-586
ISSN:	1558-7967 0001-4826
DOI:	10.2308/accr-51153
Popis:	We assess the role of both accruals manipulation (AM) and real activities manipulation (RAM) in inducing overvaluation at the time of a seasoned equity offering (SEO). Our results reveal that earnings management is most consistently and predictably linked with post-SEO stock market underperformance when it is driven by RAM; in particular, the opportunistic reduction of expenditures on R&D and selling, general, and administrative activities. Thus, overvaluation at the time of the SEO is more likely when managers actively engage in more opaque channels to overstate earnings. Our findings are particularly relevant because managers exhibit a greater propensity for RAM at the time of SEOs, even though RAM is more costly in the long run. JEL Classifications: G14; G31; M4; M41
Databáze:	OpenAIRE
Externí odkaz:	https://explore.openaire.eu/search/publication?articleId=doi_________::80c8e401cdd4023bf21e8d6337978873 https://doi.org/10.2308/accr-51153 Zobrazit plný text záznamu