Managerial optimism or managerial opportunism: From a seasoned equity offerings perspective

Yueh-Hsiang Lin and Ruei-Shian Wu

Asia-Pacific Journal of Accounting & Economics, 2020, vol. 27, issue 5, 630-647

Abstract: This study explores whether high-growth firms use accruals as a signal, rather than as a misleading device, in seasoned equity offerings (SEOs). For high-growth companies only, we find a positive relation between pre-SEO discretionary accruals and SEO announcement returns. We fail to find a negative relation between pre-SEO accruals and post-SEO long-run returns. Finally, we observe a positive relation between pre-SEO accruals and the long-run operating performance. Our findings suggest that high-growth firms are more likely to use high abnormal accruals during SEOs to signal managerial optimistic perspectives, while managerial opportunism is more likely to appear in non-high-growth firms.

Date: 2020
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DOI: 10.1080/16081625.2018.1424000

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Asia-Pacific Journal of Accounting & Economics is currently edited by Yin-Wong Cheung, Hong Hwang, Jeong-Bon Kim, Shu-Hsing Li and Suresh Radhakrishnan

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