1 <h5>Introduction</h5> Recent research suggests that firms issuing equity can inflate their stock price temporarily via earnings management prior to the offering. Teoh, Welch, and Wong (1998a) find that firms report income-increasing discretionary accruals before seasoned equity offerings (SEOs) and that long-run, post-issue operating and return performance is negatively related to earnings management. DuCharme, Malatesta, and Sefcik (2004) support the view that some firms opportunistically manipulate earnings upward before stock offerings, rendering themselves vulnerable to litigation. These studies conclude that market participants fail to adequately adjust for earnings management, leading to post-offering stock underperformance. Equity-issuing firms can also increase their stock price by reducing their cost of capital through voluntary disclosure. Botosan (1997) finds that the cost of capital is negatively associated with the level of voluntary disclosure. Most previous studies of disclosure strategies focus on either the reduction of the cost of capital ( Diamond and Verrecchia, 1991 ; Botosan, 1997 ; Botosan and Plumlee, 2002 ) or the reduction of information asymmetry ( Coller and Yohn, 1997 ; Healy and Palepu, 1993, 2001 ; Schrand and Verrecchia, 2004 ). Despite the pivotal role that disclosure strategies play in the SEO market, the causes and ramifications of
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