Empirical Research on Accrual and Real Earnings Management: Evidence from Seasoned Equity Offerings

This paper reviews the existing literature, and then puts forward two hypotheses. We use the sample of firms that have undergone seasoned equity offerings (SEOs) in 2012 and combine both normative research and empirical research. Further, we build the modified Jones model and draw on Roychowdhury's method to examine the existence of accrual and real earnings management, the correlation between the two and their impacts on short-term performance. The results show that there are accrual and real earnings management before and after SEOs, and accrual and real earnings management are highly correlated. Additionally, the effect of accrual earnings management on short-term performance is greater than that of real earnings management.