Publication Type
Journal Article
Version
acceptedVersion
Publication Date
1-2008
Abstract
Popular press suggests that diversified firms are more aggressive in managing earnings than non-diversified firms. We examine this claim in the seasoned equity offering (SEO) setting, where firms have been shown to have the incentive to manage earnings upwards. Using the cross-sectional modified Jones [(1991) J Accounting Res 29:193–228] model to measure discretionary current accruals, we find that discretionary current accruals are higher among diversified firms than in non-diversified ones. Our evidence is consistent with the view that the extent of firm diversification is directly related to the degree of earnings management. We further show that diversified issuers with high discretionary accruals underperformed other SEO firms.
Discipline
Finance and Financial Management | Portfolio and Security Analysis
Research Areas
Quantitative Finance
Publication
Review of Quantitative Finance and Accounting
Volume
30
Issue
1
First Page
69
Last Page
92
ISSN
0924-865X
Identifier
10.1007/s11156-007-0043-x
Publisher
Springer
Citation
LIM, Chee Yeow; THONG, Tiong Yang; and Ding, David K..
Firm diversification and earnings management: Evidence from seasoned equity offerings. (2008). Review of Quantitative Finance and Accounting. 30, (1), 69-92.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/1143
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1007/s11156-007-0043-x