The Role of Accounting Conservatism in the Equity Market: Evidence from Seasoned Equity Offerings

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Using seasoned equity offerings (SEOs) from 1989 to 2008, we examine the role of accounting conservatism in the equity market. We find that issuers with a greater degree of conservatism experience fewer negative market reactions to SEO announcements. We further show that an important mechanism through which conservatism affects SEO announcement returns is by mitigating the negative impact of information asymmetry. Additional analyses suggest that our results are not driven by the effects of other forms of corporate governance. We also find evidence that conservative issuers continue to use conservative accounting after the equity offerings. Taken together, our findings are consistent with the argument that accounting conservatism reduces financing costs in SEOs.
Publisher
AMER ACCOUNTING ASSOC
Issue Date
2013-07
Language
English
Article Type
Article
Keywords

EARNINGS MANAGEMENT; INFORMATION ASYMMETRY; INVESTMENT DECISIONS; ACQUIRER RETURNS; ACCRUALS QUALITY; LOSS RECOGNITION; CARVE-OUTS; TIMELINESS; ISSUES; COSTS

Citation

ACCOUNTING REVIEW, v.88, no.4, pp.1327 - 1356

ISSN
0001-4826
DOI
10.2308/accr-50420
URI
http://hdl.handle.net/10203/244363
Appears in Collection
MT-Journal Papers(저널논문)
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