Journal of Financial Economics Vol. 71 No. 1 2004
Earnings management, stock issues, and shareholder lawsuits
Abstract
Abnormal accounting accruals are unusually high around stock offers, especially high for firms whose offers subsequently attract lawsuits. Accruals tend to reverse after stock offers and are negatively related to post-offer stock returns. Reversals are more pronounced and stock returns are lower for sued firms than for those that are not sued. The incidence of lawsuits involving stock offers and settlement amounts are significantly positively related to abnormal accruals around the offer and significantly negatively related to post-offer stock returns. Our results support the view that some firms opportunistically manipulate earnings upward before stock issues rendering themselves vulnerable to litigation.
- DOI
- 10.1016/s0304-405x(03)00182-x
- Volume
- 71
- Issue
- 1
- Pages
- 27-49
- Language
- en
- Sources
- crossref bibtex:phds-export.bib openalex