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Business Professors’ Paper Published in The Accounting Review
Monday, Jul. 1, 2013
Congratulations to Professors Yongtae Kim and Siqi Li of the Accounting Department, Carrie Pan of the Finance Department and MIT’s Luo Zhuo for the acceptance of their paper “The Role of Accounting Conservatism in the Equity Market: Evidence from Seasoned Equity Offerings” to The Accounting Review. Their paper will be published in the July 2013 issue.
The abstract for their paper: Using seasoned equity offerings (SEOs) from 1989 to 2008, we examine the role of accounting conservatism in the equity market. We find that issuers with a greater degree of conservatism experience less negative market reactions to SEO announcements. We further show that an important mechanism through which conservatism affects SEO announcement returns is by mitigating the negative impact of information asymmetry. Additional analyses suggest that our results are not driven by the effects of other forms of corporate governance. We also find evidence that conservative issuers continue to use conservative accounting after the equity offers. Taken together, our findings are consistent with the argument that accounting conservatism reduces financing costs in SEOs.