Underwriter choice and earnings management: evidence from seasoned equity offerings

• 成果类型: Article
• 署名作者: Jo, Hoje; Kim, Yongtae; Park, Myung Seok
• 署名单位: Santa Clara University; Virginia Commonwealth University
• 刊物名称: REVIEW OF ACCOUNTING STUDIES
• ISSN/ISSBN: 1380-6653
• DOI: 10.1007/s11142-006-9019-7
• 发表日期: 2007
• 页码: 23-59
• 关键词: initial public offerings; weak instruments; performance; certification; issues; MARKET; UNDERPERFORMANCE; determinants; returns; FIRMS

摘要

Using a sample of seasoned equity offerings (SEOs), this paper examines the association between the choice of financial intermediary and earnings management. We contend that with more stringent standards for certification and intense monitoring, highly prestigious underwriters restrict firms' incentives for earnings management to protect their reputation and to avoid potential litigation risks, while firms with greater incentives for earnings management avoid strict monitoring by choosing low-quality underwriters. Consistent with our predictions, we find an inverse association between underwriter quality and issuers' earnings management. In addition, we find that underwriter quality is positively related to SEOs' post-issue performance, even after controlling for the effect of earnings management. We also find that firms with low-underwriter prestige and high levels of earnings management under-perform the most. However, the effect of underwriter choice on post-issue performance does not last long.