Accrual-based and real earnings management activities around seasoned equity offerings

Daniel A. Cohen and Paul Zarowin

Journal of Accounting and Economics, 2010, vol. 50, issue 1, 2-19

Abstract: We show that SEO firms engage in real activities manipulation, and the decline in post-SEO performance due to the real activities management is more severe than that due to accrual management. Our evidence is important, because it shows that post-SEO operating underperformance is driven not just by accrual reversals, but also reflects the real consequences of operational decisions made to manage earnings. We also show how firms' choices of real versus accrual-based earnings management activities around SEOs vary predictably as a function of the firm's ability to use accrual management and the costs of doing so.

Keywords: Seasoned; equity; offerings; Earnings; management; Accounting; choices; Accounting; Accruals; Real; activities (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (559)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jaecon:v:50:y:2010:i:1:p:2-19

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