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Bankruptcy Probability Changes And The Differential Informativeness Of Bond Upgrades And Downgrades, Yongtae Kim, Sandeep Nabar
Bankruptcy Probability Changes And The Differential Informativeness Of Bond Upgrades And Downgrades, Yongtae Kim, Sandeep Nabar
Accounting
Prior studies have found that stock returns around announcements of bond upgrades are insignificant, but that stock prices respond negatively to announcements of bond downgrades. This asymmetric stock market reaction suggests either that bond downgrades are timelier than upgrades, or that voluntary disclosures by managers preempt upgrades but not downgrades. This study investigates these conjectures by examining changes in firms' probabilities of bankruptcy (assessed using bankruptcy prediction models) and voluntary disclosure activity around rating change announcements. The results indicate that the assessed probability of bankruptcy decreases before bond upgrades, but not after. By contrast, the assessed probability of bankruptcy increases …
Disclosure Frequency And Earnings Management, Hoje Jo, Yongtae Kim
Disclosure Frequency And Earnings Management, Hoje Jo, Yongtae Kim
Accounting
We examine the relation between disclosure frequency and earnings management,and the impact of this relation on post-issue performance, for a sample of seasoned equityofferings (SEOs). We contend that firms with extensive disclosure are less likely to faceinformation problems, leading to less earnings management and better post-issueperformance. Our results confirm that disclosure frequency is inversely related toearnings management and positively associated with post-issue performance. We alsofind that transparency-reducing disclosure is concentrated in firms that substantially, buttemporarily, increase disclosure prior to the offering. Such firms exhibit more earningsmanagement and poorer post-SEO stock performance, on average.JEL classification:G14; G24; G32; M41
Underwriter Choice And Earnings Management: Evidence From Seasoned Equity Offerings, Hoje Jo, Yongtae Kim, Myung Seok Park
Underwriter Choice And Earnings Management: Evidence From Seasoned Equity Offerings, Hoje Jo, Yongtae Kim, Myung Seok Park
Accounting
Using a sample of seasoned equity offerings (SEOs), this paper examines the association between the choice of financial intermediary and earnings management. We contend that with more stringent standards for certification and intense monitoring, highly prestigious underwriters restrict firms' incentives for earnings management to protect their reputation and to avoid potential litigation risks, while firms with greater incentives for earnings management avoid strict monitoring by choosing low-quality underwriters. Consistent with our predictions, we find an inverse association between underwriter quality and issuers' earnings management. In addition, we find that underwriter quality is positively related to SEOs' post-issue performance, even after …