The Relationship between Earnings Management and Equity Market Timing

ABSTRACT Objective: this study aims to verify if companies that practice equity market timing have higher earnings management levels around the stock issue period. Method: we used a sample of 68 seasoned offerings (SEOs) in Brazil from 2004-2015. First, ranked among (timers) behavior SEOs and those did not (non-timers). Second, estimated each company’s by Modified Jones with ROA models. Finally, tested relationship between using linear regression model. Results: results show timers managed more intensively quarters than non-timers. This happens increase net income consequently improve profitability ratios. Therefore, explore opportunity windows, managers can inflate accounting profit through accruals influence market’s ability correctly price shares. Conclusion: Brazilian as way exploiting windows market. The conclusion reinforces need for careful analysis profits investors, analysts, auditors, regulators while allowing efforts avoid such practices compliance, governance, regulation.