Management Guidance of Analyst Forecasts before Seasoned Equity Offerings

• Main Authors: Chin-Yin Chiao, 喬金銀
• Other Authors: none
• Format: Others
• Language: zh-TW
• Published: 2007
• Online Access: http://ndltd.ncl.edu.tw/handle/71937602330213423961

碩士 === 國立中正大學 === 會計與資訊科技所 === 95 === This paper investigates whether management guide analyst forecasts before seasoned equity offerings (SEOs). This paper contends that Management has incentive to issue forecasts so as to guide analysts before SEOs in an effort to raise more capital. Analysts follow management’s lead due to underwriting incentives. Investors make their decisions basing on analyst forecasts and hence are misled. After SEOs, investors realize that SEOs were overvalued and hence the long-term abnormal returns drop. Consistent with our argument, this study finds that there is a greater management guidance of analyst forecasts for firms issuing SEOs versus those that are not. In addition, for firms issuing SEOs, there is a greater level of management guidance of analysts before than after SEOs. The long-term abnormal returns increase before SEOs and drop afterwards due to upward management guidance before SEOs. The level of management guidance is reduced after the effectiveness of Regulations regarding Analyst Conflict of Interest Issues. However, the upward management guidance of analyst forecasts for SEO firms and before SEOs for these firms is still significant. This indicates that these regulations were effective in reducing analysts’ following management guidance to obtain future investment banking businesses, but not incentives to make current SEO deals successful.