ABSTRACT We examine how accounting quality attributes jointly mitigate underpricing associated with two dimensions of information risk in seasoned equity offerings (SEOs). In information environments with relatively more potent information asymmetry, the evidence suggests that accruals quality and accounting comparability act as substitutes; i.e., accounting comparability mitigates underpricing associated with lower quality accruals. In relatively less asymmetry‐potent settings, the evidence suggests a complementary interactive effect, whereby higher quality accruals potentiate the effectiveness of comparability in mitigating uncertainty‐driven underpricing. The paper informs standard‐setter conceptualizations of accounting attributes and advances research on the role of accounting quality in mitigating information risk‐related market frictions.
Bordeman et al. (Wed,) studied this question.