Accrual Quality and Opportunistic Seasoned Equity Offering in the Korean Stock Market

Abstract

We examine accrual quality (AQ) and its relationship with opportunistic seasoned equity offering (SEO) in the emerging Korean stock market. According to our empirical results, SEO firms with lower AQ tend to show higher abnormal returns around SEO announcement and significantly lower long-term performance after SEO. These results are more evident for SEO firms in which influence of institutional investors is weak. These findings suggest that poor AQ may be an important predictor of incentive for opportunistic SEOs and that the incentive may strengthen when institutional investors’ monitoring role weakens.