| Summary: | 碩士 === 開南大學 === 財務金融學系 === 100 === Seasoned equity offerings (SEOs) are one of the important financing policy. Before the execution of SEO, companies may use a variety of approaches to show investors the firms are superior to their peers and deserve higher evaluation. Earnings management which allows firms to show investors higher profitability by increase discretional accruals may be employed by some firms which are not well operated but intent to finance by SEO. Past literatures show that a majority of companies experience poor stock price performance after SEOs, but little attention has been paid to the issue that whether SEO announcements are preceded or followed by the employment of earnings management which may indirectly influence stock price performance. Particularly, when investors understand the bright operating incomes revealed are actually polished by higher discretional accruals, they must re-evaluate the firm value, making a drop in stock prices. Therefore, this study is mainly examine the effect of earnings management on stock returns around SEOs. The sample are the listed firms with SEO announcements from 2000 to 2008 in Taiwan, and each are compared to a match firms by matching their previous operating performance, industry, and firm size. The discretionary current accruals and non-discretionary current accruals estimated by using the modified Jones model. The empirical results show that the operating performance is better before SEOs, and declining after the execution of SEOs. In addition, the long-term stock returns in positive group are better than conservative one. There operating performance also seems to have positive effect on the buy-and-hold returns (BHARs) after SEOs. In addition, it is negative relation between firms BHARs in the last year and match firms buy-and-hold return. However, this research does not find any apparent explanatory effect of discretional accruals on the post-SEO BHARs. The evidence implies that operating performance is the main factor influencing post-SEO BHARs, but not earnings management.
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