Ethics and disclosure: A study of the financial performance of firms in the seasoned equity offerings market

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In this article, we examine the association between ethics and disclosure and the impact of this association on the long-term, post-issue performance of seasoned equity offerings (SEOs). We argue that firms with extensive disclosure are less likely to face information problems, and more likely to lead to an active shareholder monitoring, and therefore, engage in fewer unethical activities, such as aggressive earnings manipulation, and have better long-term, post-issue performance. Consistent with these predictions, this study presents evidence that disclosure is negatively related to unethical earnings manipulation and positively associated with long-term, post-issue performance. In particular, we find that long-term, post-issue SEO underperformance is significantly less for firms with extensive disclosure and conservative earnings management than firms with less disclosure and aggressive earnings management. We interpret this evidence to mean that over the long run, the capital market values ethical financial reporting and corporate efforts to incorporate social responsibility into their decision-making processes, for example, by enhancing information transparency through voluntary disclosure.
Publisher
SPRINGER
Issue Date
2008-07
Language
English
Article Type
Article
Keywords

CORPORATE SOCIAL-RESPONSIBILITY; EARNINGS MANAGEMENT; LAWSUITS; ACCRUALS; BEHAVIOR

Citation

JOURNAL OF BUSINESS ETHICS, v.80, no.4, pp.855 - 878

ISSN
0167-4544
DOI
10.1007/s10551-007-9473-6
URI
http://hdl.handle.net/10203/244388
Appears in Collection
MT-Journal Papers(저널논문)
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