Managerial optimism or managerial opportunism: From a seasoned equity offerings perspective

Abstract

This study explores whether high-growth firms use accruals as a signal, rather than as a misleading device, in seasoned equity offerings (SEOs). For high-growth companies only, we find a positive relation between pre-SEO discretionary accruals and SEO announcement returns. We fail to find a negative relation between pre-SEO accruals and post-SEO long-run returns. Finally, we observe a positive relation between pre-SEO accruals and the long-run operating performance. Our findings suggest that high-growth firms are more likely to use high abnormal accruals during SEOs to signal managerial optimistic perspectives, while managerial opportunism is more likely to appear in non-high-growth firms.