Seasoned Equity Offerings and Earnings Management

Abstract

The relationship between earnings management and seasoned equity offerings (SEO) is a topic which have generated interest from scholars. However, there has been limited research focusing on the connection between earnings management and SEOs in the post-Sarbanes-Oxley Act (SOX) period. Our study aims to contribute to the existing literature by examining the relationship between real and accrual-based earnings management around SEOs in the post-SOX era. Contrary to previous findings, our results indicate no evidence of real earnings management. While we observe a slight increase in discretionary accruals in the years leading up to the issuance, this increase is not statistically significant. We also do not find a statistically significant post-issue decrease. Our findings on the effect of earnings management on post-issue valuation indicate no statistically significant negative relation.