Accounting flexibility and managers' forecast behavior prior to seasoned equity offerings

This study examines the effect of accounting flexibility on managers’ forecasting behavior prior to seasoned equity offerings (SEOs). Although SEO firms have a strong incentive to convey optimistic information to boost the pre-SEO stock price, they also face enhanced litigation risk arising from SEO...

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Main Author: KIM, Jae Bum
Format: text
Language:English
Published: Institutional Knowledge at Singapore Management University 2016
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Online Access:https://ink.library.smu.edu.sg/soa_research/1564
https://ink.library.smu.edu.sg/context/soa_research/article/2591/viewcontent/AccountingFlexibilityManagerForecastSEO_2016.pdf
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Institution: Singapore Management University
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spelling sg-smu-ink.soa_research-25912020-01-22T15:18:00Z Accounting flexibility and managers' forecast behavior prior to seasoned equity offerings KIM, Jae Bum This study examines the effect of accounting flexibility on managers’ forecasting behavior prior to seasoned equity offerings (SEOs). Although SEO firms have a strong incentive to convey optimistic information to boost the pre-SEO stock price, they also face enhanced litigation risk arising from SEO-related regulations. Thus, I hypothesize that managers will release positive news through their forecasts (relative to the prevailing analyst consensus) prior to an SEO only if they have the accounting flexibility to manage subsequent reported earnings to meet or exceed their forecasts. I find that managers with greater accounting flexibility are more likely to issue a forecast prior to the SEO and that their forecasts are more likely to convey positive news and are more specific. Furthermore, I find no effect of accounting flexibility for non-SEO control firms or for non-SEO periods. My results suggest that when managers experience a tension between the incentive for voluntary disclosure and high litigation risk, accounting flexibility is an important factor that determines their forecasting behavior. 2016-12-01T08:00:00Z text application/pdf https://ink.library.smu.edu.sg/soa_research/1564 info:doi/10.1007/s11142-016-9372-0 https://ink.library.smu.edu.sg/context/soa_research/article/2591/viewcontent/AccountingFlexibilityManagerForecastSEO_2016.pdf http://creativecommons.org/licenses/by-nc-nd/4.0/ Research Collection School Of Accountancy eng Institutional Knowledge at Singapore Management University Voluntary disclosure management earnings forecast accounting flexibility seasoned equity offerings Accounting Corporate Finance
institution Singapore Management University
building SMU Libraries
continent Asia
country Singapore
Singapore
content_provider SMU Libraries
collection InK@SMU
language English
topic Voluntary disclosure
management earnings forecast
accounting flexibility
seasoned equity offerings
Accounting
Corporate Finance
spellingShingle Voluntary disclosure
management earnings forecast
accounting flexibility
seasoned equity offerings
Accounting
Corporate Finance
KIM, Jae Bum
Accounting flexibility and managers' forecast behavior prior to seasoned equity offerings
description This study examines the effect of accounting flexibility on managers’ forecasting behavior prior to seasoned equity offerings (SEOs). Although SEO firms have a strong incentive to convey optimistic information to boost the pre-SEO stock price, they also face enhanced litigation risk arising from SEO-related regulations. Thus, I hypothesize that managers will release positive news through their forecasts (relative to the prevailing analyst consensus) prior to an SEO only if they have the accounting flexibility to manage subsequent reported earnings to meet or exceed their forecasts. I find that managers with greater accounting flexibility are more likely to issue a forecast prior to the SEO and that their forecasts are more likely to convey positive news and are more specific. Furthermore, I find no effect of accounting flexibility for non-SEO control firms or for non-SEO periods. My results suggest that when managers experience a tension between the incentive for voluntary disclosure and high litigation risk, accounting flexibility is an important factor that determines their forecasting behavior.
format text
author KIM, Jae Bum
author_facet KIM, Jae Bum
author_sort KIM, Jae Bum
title Accounting flexibility and managers' forecast behavior prior to seasoned equity offerings
title_short Accounting flexibility and managers' forecast behavior prior to seasoned equity offerings
title_full Accounting flexibility and managers' forecast behavior prior to seasoned equity offerings
title_fullStr Accounting flexibility and managers' forecast behavior prior to seasoned equity offerings
title_full_unstemmed Accounting flexibility and managers' forecast behavior prior to seasoned equity offerings
title_sort accounting flexibility and managers' forecast behavior prior to seasoned equity offerings
publisher Institutional Knowledge at Singapore Management University
publishDate 2016
url https://ink.library.smu.edu.sg/soa_research/1564
https://ink.library.smu.edu.sg/context/soa_research/article/2591/viewcontent/AccountingFlexibilityManagerForecastSEO_2016.pdf
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