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

• 成果类型: Article
• 署名作者: Kothari, S. P.; Mizik, Natalie; Roychowdhury, Sugata
• 署名单位: Massachusetts Institute of Technology (MIT); University of Washington; University of Washington Seattle; Boston College
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr-51153
• 发表日期: 2016
• 页码: 559-586
• 关键词: activities manipulation; performance; uncertainty; INVESTMENT; investors; returns; QUALITY; issues

摘要

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 time of SEOs, even though RAM is more costly in the long run.