Abstract

http://ssrn.com/abstract=2170179
 
 

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


Yongtae Kim


Santa Clara University - Leavey School of Business

Siqi Li


Santa Clara University - Leavey School of Business

Carrie H. Pan


Santa Clara University - Department of Finance

Luo Zuo


Cornell University - Samuel Curtis Johnson Graduate School of Management

April 2013

The Accounting Review, Forthcoming

Abstract:     
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 less 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.

Number of Pages in PDF File: 47

Keywords: accounting conservatism, seasoned equity offerings, announcement returns

JEL Classification: D82, G14, G32, M41

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Date posted: November 4, 2012 ; Last revised: April 23, 2013

Suggested Citation

Kim, Yongtae and Li, Siqi and Pan, Carrie H. and Zuo, Luo, The Role of Accounting Conservatism in the Equity Market: Evidence from Seasoned Equity Offerings (April 2013). The Accounting Review, Forthcoming. Available at SSRN: http://ssrn.com/abstract=2170179 or http://dx.doi.org/10.2139/ssrn.2170179

Contact Information

Yongtae Kim
Santa Clara University - Leavey School of Business ( email )
500 El Camino Real
Santa Clara, CA California 95053
United States
(408) 554-4667 (Phone)
(408) 554-2331 (Fax)
Siqi Li
Santa Clara University - Leavey School of Business ( email )
500 El Camino Real
Santa Clara, CA 95053
United States
Carrie H. Pan
Santa Clara University - Department of Finance ( email )
Santa Clara, CA 95053
United States
(408)5517188 (Phone)
Luo Zuo (Contact Author)
Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )
362 Sage Hall
Ithaca, NY 14853
United States
607-255-4002 (Phone)
HOME PAGE: http://www.johnson.cornell.edu/Faculty-And-Research/Profile.aspx?id=lz352

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