Managerial Optimism or Managerial Opportunism: From a Seasoned Equity Offerings Perspective

54 Pages Posted: 31 Jan 2017 Last revised: 17 Jun 2018

See all articles by Ruei-Shian Wu

Ruei-Shian Wu

Yuan Ze University

Yueh-hsiang Lin

National Taipei College of Business

Date Written: January 30, 2017

Abstract

This study explores whether high-growth firms use accruals as a signal instead of a misleading device in seasoned equity offerings (SEOs). Using firms listed on the NYSE, AMEX, and NASDAQ from 1987 to 2010 as our sample and the subsequent 5 years of the sample firms to examine ex-post performance, we find a positive relation between pre-SEO discretionary accruals and SEO announcement returns only for high-growth companies. We also investigate the relation between pre-SEO discretionary accruals and post-SEO long-run returns and do not find a negative relation for the high-growth subsample. Finally, we find a positive relation between pre-SEO accruals and the long-run operating performance for the high-growth subsample. Our findings suggest that high-growth firms are more likely to use high abnormal accruals during SEOs as a signal of managerial optimistic perspectives, especially under high information asymmetry. Alternatively, managerial opportunism is more likely to appear in non-high-growth firms.

Keywords: Accruals, Managerial opportunism, Managerial optimism, Seasoned equity offerings, Signaling

JEL Classification: G14, G29, J44

Suggested Citation

Wu, Ruei-Shian and Lin, Yueh-hsiang, Managerial Optimism or Managerial Opportunism: From a Seasoned Equity Offerings Perspective (January 30, 2017). Asia-Pacific Journal of Accounting & Economics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2908366 or http://dx.doi.org/10.2139/ssrn.2908366

Ruei-Shian Wu (Contact Author)

Yuan Ze University ( email )

135 Yuan-Tung Road
Chung-Li, 32003
Taiwan
886-3-4638800#2195 (Phone)
886-3-4633845 (Fax)

Yueh-hsiang Lin

National Taipei College of Business ( email )

Taipei
Taiwan

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