SEASONED EQUITY OFFERINGS: BETWEEN AGENCY THEORY, WINDOWS OF OPPORTUNITY, AND FIRM PERFORMANCE

Nurazi, M.Ridwan and Santi, Fitri and Deswita, Liana (2014) SEASONED EQUITY OFFERINGS: BETWEEN AGENCY THEORY, WINDOWS OF OPPORTUNITY, AND FIRM PERFORMANCE. In: Borderless Economy: Opportunities And Challenges For Businesses In Southeast Asia, 13-14 October 2011, Fakultas Ekonomi Universitas Bengkulu, Indonesia.

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Abstract

The purpose of this study was to examine the effect of discretionary total accruals (earnings management) to operating performance and stock return of companies doing seasoned equity offerings (SEO) in the Indonesia Stock Exchange. This research was also to know the signifacant differences in operating performance and stock performance between SEO firms and non-SEO firms. Tests were conducted against 23 SEO going public firms and 25 non SEO going public firms during the years 1996- 2006, with the period of observation for three years before SEO, as SEO, and three years after SEO. Model used to test earnings management is using a Modified by Jones Model. Proxies used to measure earnings management is the discretionary total accrual, operating performance measured by return on assets and stock performance measured by cumulative abnormal return. This study uses a simple linear regression and different test using independent sample t-test. This research found that the sample firms in this study perform earnings management with the pattern of income decreasing at the SEO. The study also found evidence that earnings management affects the operating performance and stock performance of SEO firms. However, researchers found no evidence that there are significant differences between operating performance and stock performance among SEO companies compared to non-SEO firms.

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