Real earnings management, liquidity risk and REITs SEO dynamics
Publication Type
Journal Article
Publication Date
1-2018
Abstract
We analyze how REITs managers use real earnings management to address issues of liquidity risk and increased cost of capital they face during seasoned equity offerings. We show that REITs managers engage in real earnings management instead of accrual earnings management to attract more uninformed trading in order to provide the liquidity service at a lower cost during seasoned equity offerings. We find REITs with higher liquidity risk are more likely to manipulate earnings prior to equity offerings and uninformed trading is higher following real earnings management. Firms set the offer price at a smaller discount after engaging in real earnings management and stock returns decline in the long run. The findings are consistent with real option and liquidity risk explanations for equity offerings.
Keywords
Real estate investment trust, Seasoned equity offerings, Liquidity risk, Real earnings management
Discipline
Finance and Financial Management | Real Estate
Publication
Journal of Real Estate Finance and Economics
Volume
56
Issue
3
First Page
410
Last Page
442
ISSN
0895-5638
Identifier
10.1007/s11146-017-9649-5
Publisher
Springer
Citation
DENG, Xiaoying and ONG, Seow Eng.
Real earnings management, liquidity risk and REITs SEO dynamics. (2018). Journal of Real Estate Finance and Economics. 56, (3), 410-442.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/7232
Copyright Owner and License
Authors
Additional URL
https://doi.org/10.1007/s11146-017-9649-5