Studying the Relation Between Earnings Quality and Market Reaction to Raising Equity Capital From Stockholders Funds and Receivables

The purpose of this study is investigating the relation between earnings quality and cumulative abnormal returns around the announcement of new equity issues from stockholders funds and receivables. In this study, earnings quality and cumulative abnormal returns has been measured respectively based on modified Jones model (1991) and market model. Also we used variance analysis and regression analysis for testing the relation between earnings quality and cumulative abnormal returns. The result of both test shows that there is no significant relation between earnings quality and market reaction to new equity issue announcement.