The purpose of the study in the given article is to show the relation or significance of earnings management by the firms

who offer seasoned equity issues and the pricing of these SEOs which raises the argument the equity issuers have an enticement to enhance their earnings before an offering as well as push the offer prices up to increase the offering proceeds due to the direct impact of on the issuers wealth or assets to the offer price in an equity offering. They also hypothesize that SEO firms that employ riskier accounting decisions also employ greater offer prices up and if the offer day closing price does not increase as much as the offer price, a negative relation between discretionary accruals and SEO underpricing is expected.

In this recent study, different arguments were also raised because of the evidences acquired in the process which may also affect the study being done. They has suggested that seasoned equity offers tend to be significantly underpriced and at the same time, there is a negative correlation between post-offer returns and pre-issue earnings management which was taken from other documents where firms manage earnings around SEOs. However, after studying and giving it a good amount of time, it has been concluded that none of the studies directly examines the relevance of the earnings management and the pricing of SEOs which directly affect the issuers wealth.

Overall, the results in the experiment presented are consistent and valid with the groups prediction with the issuers greed hypothesis. The findings above are proved to be consistent with other determinants of SEO underpricing after examining together, and it will not change the result if there will be alternative measures for the underpricing and discretionary accruals.
7 Pricing of Seasoned Equity Offers and Earnings Management by CHRISTINE REYES