Earnings Management and Underperformance after Seasoned Equity Offerings: A Cross-Country Study

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dc.contributor.authorOpare S
dc.contributor.authorHouqe M
dc.contributor.authorvan Zijl T
dc.date.available2022-12-14
dc.date.issued2022-12-14
dc.descriptionCopyright © 2022, Emerald Publishing Limited. This AAM is provided for your own personal use only. It may not be used for resale, reprinting, systematic distribution, emailing, or for any other commercial purpose without the permission of the publisher.
dc.description.abstractPurpose: This purpose of this study is to examine the association between earnings management (accruals earnings management (AEM) and/or real activities manipulation (RAM)) and firm underperformance following seasoned equity offerings (SEOs) using cross-country data. Design/methodology/approach: The study applies ordinary least squares regression analyses to a sample of 11,764 observations on firms from 22 countries over the period from 2005 to 2017. The methods include weighted least squares regression, sub-sampling approach and alternative measures of firm performance, earnings management and legal regime for robustness tests as well as a two-stage least squares instrumental variable (IV) approach to address endogeneity concerns. Findings: The results suggest that RAM has a greater negative impact on post-SEO performance than AEM. The result is economically significant for RAM only. The results also reveal that the negative impact of earnings management, in particular RAM, on post-SEO performance is greater in countries with a strong legal regime than in other countries. Practical implications: Earnings management around SEOs has important implications for investors, regulators and policymakers. The study suggests that policymakers should improve the current legal conditions to promote fairness in the equity market. Originality/value: The results from the cross-country data support earlier results from single-country studies on the impact of earnings management on post-SEO performance. The study also provides new evidence on the variation in the impact of earnings management according to the strength of the legal regime operating in a country.
dc.description.confidentialfalse
dc.identifier.citationInternational Journal of Managerial Finance, 2022
dc.identifier.doi10.1108/IJMF-02-2022-0075
dc.identifier.elements-id458506
dc.identifier.harvestedMassey_Dark
dc.identifier.issn1743-9132
dc.publisherEmerald
dc.relation.isPartOfInternational Journal of Managerial Finance
dc.subject.anzsrc1501 Accounting, Auditing and Accountability
dc.subject.anzsrc1502 Banking, Finance and Investment
dc.titleEarnings Management and Underperformance after Seasoned Equity Offerings: A Cross-Country Study
dc.typeJournal article
pubs.notesNot known
pubs.organisational-group/Massey University
pubs.organisational-group/Massey University/Massey Business School
pubs.organisational-group/Massey University/Massey Business School/School of Accountancy
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