Earnings Management Research Around Seasoned Equity Offerings And The Economic Consequences

Earnings management behavior has been the focus of accounting research by scholars. With the transformation of China’s economic growth mode from the traditional materialization to capitalization, the financing function of the capital market plays an important role in the development of enterprises. In order to guarantee the financing function of capital market, protect the benefit of investors and specify the financing behavior of listed companies, the Securities Regulatory Commission made strict restrictions and regulations for listed companies on refinancing qualifications and conditions, which could prevent listed companies from earnings management motivation to meet refinancing qualifications. In addition, after the United States enacted the Sarbanes-Oxley Act, which included more detailed and specific provisions of accounting standards, there was a new change in western countries’earnings management that gradually from accrual to real activities. China’s new accounting standards implemented in2007which absorbed the International Accounting Standards practice largely compressed the operating space of accruals earnings management. So real earnings management activities become a new hot topic in earnings management studies at home and abroad.In this paper, we choose listed companies that raise equity refinancing as the research objects and select a total of286listed companies in2007-2010in A share market as samples to explore the two earnings management behaviors and the economic consequences.The study finds that equity refinancing listed companies exists not only accrual earnings management but also exists real activity earnings management. After equity financing, the performance of listed companies appear declining trend, accrual earnings management can lead to short-term decline in performance, while real earnings management adversely affect the long-term value growth. That is to say real earnings management does greater damage to performance than accrual earnings management, which may be the real reason of declining performance in refinancing listed companies.