The Role of Accounting Conservatism in the Equity Market: Evidence from Seasoned Equity Offerings
Kim, Yongtae, Li, Siqi, Pan, Carrie, Zuo, Luo
The Accounting Review · 2013 · Volume 88 · Issue 4
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 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. Data Availability:Data used in this study are available from public sources identified in the study.
Keywords
accounting conservatism, seasoned equity offerings, announcement returns
Enable JavaScript for citation tools and additional paper interactions.