Disclosure Frequency and Earnings Management
Posted: 1 Sep 2006
Abstract
Using a sample of seasoned equity offerings (SEOs), we examine the relation between disclosure frequency and earnings management and the impact of this relation on SEOs' post-issue performance. We contend that firms with extensive disclosure are less likely to face information problems, leading to less earnings management and better post-issue performance. Consistent with these conjectures, this study presents evidence that disclosure frequency is inversely related to earnings management and positively associated with post-issue performance. In addition, we find that transparency-reducing disclosure is concentrated in firms that substantially, but temporarily increase disclosure prior to the offering. A non-persistent increase in disclosure is positively associated with earnings management and negatively associated with post-SEO stock performance.
Keywords: Seasoned equity offerings, Earnings management, Disclosure frequency, Post-issue performance
JEL Classification: G14, G24, G32, M41
Suggested Citation: Suggested Citation