Earnings Management Research Around Seasoned Equity Offerings

In order to protect the benefit of investors and specify the financing behavior of listed companies, the Securities Regulatory Commission made regulations for listed companies on refinancing conditions, which could prevent listed companies from earnings management motivation to meet refinancing qualifications. In this paper, we choose listed companies that raise equity refinancing as the research objects and select a total of 286 listed companies in 2007-2010 in A-share market as samples to explore the two earnings management behaviors and the different effects they make on the future performance. The study finds that equity refinancing listed companies exists not only accrual earnings management but also exists real activity earnings management, both earnings management behaviors are more significant in the current year and the previous year around the seasoned equity offerings. After equity financing, the performance of listed companies appear declining trend, accrual earnings management can lead to short-term decline in performance, while real earnings management can lead to long-term decline, which may be the real reason of declining performance in refinancing listed companies.