This paper aims to the examine consequences of earnings management in Korea. We focus on the real activity based earnings management using a sample of suspect firms which are likely to be engaged in earnings management upward, seasoned equity offering(SEO) firms. We find that managers attempt to inflate their reported earnings around the SEO, specifically in the fiscal year prior to the SEO and they use real activities in addition to accruals enhancing stock prices. Operating performances after earnings management significantly declines but these underperformance are recovered in the third year after earnings management. This could be caused by accruals reversion but firms classified as being engaged in real activity based earnings management show underperformance for a long time subsequent to the earnings management. In particular, firms having lower largest shareholder’s ownership report abnormal accruals and real activities for inflating earnings before the SEO and show underperformance after that because those firms are expected to have weaker internal control system. Thus we infer the largest shareholder’s ownership is one of factors to manage earnings and negatively influence on subsequent performance. The results of earnings managements and those consequences around the SEO are consistent with Yoon and Lee(2001), but much pronounced when we examine abnormal real activity as another proxy of earnings management. Consequences of real activity based earnings management using SEO firms are the first empirical evidence reported in Korea to the best of our knowledge. These empirical evidences provide an insight into future real activity based studies even though it is based on the estimated proxies of earnings management.