This study investigates the capital market reactions to announcements of seasoned equity offerings (SEOs), earnings management activities during the year before an SEO, and the decline in post-SEO stock performance. Although previous studies focus on the type of SEO and earnings management behavior, we classify SEO firms into two subsamples, those in which the largest shareholders increase their shareholding ratio and those in which they decrease their shareholding ratio, to examine management incentives that protect the wealth of existing shareholders. The announcement of an SEO in which the largest shareholders participate is good news for the market. We first seek to examine whether the response of the capital market to an SEO in which the largest shareholder's shareholding ratio increases is more positive than its response to an SEO in which the largest shareholder's shareholding ratio decreases. Because the cash flow of an SEO is dependent on the stock price, the management has an incentive to temporarily raise the stock price to maximize the existing shareholders' wealth in SEO cases where the largest shareholder's shareholding ratio decreases. Therefore, our second hypothesis is that there is greater earnings management, involving increased reported earnings, in the year before an SEO in which the largest shareholder's shareholding ratio increases than an SEO in which it decreases. The decline in post-SEO stock performance in cases where the largest shareholder's shareholding ratio decreases is more severe than in cases where it increases, because post-SEO performance is driven by accrual reversal. Therefore, our third hypothesis is that there is higher post-SEO stock performance in cases where the largest shareholder's shareholding ratio increases than in cases where it decreases. The empirical results of this study are as follows. First, the cumulative abnormal returns (CAR) around the announcement date of SEOs in which the largest shareholders' shareholding ratio increases is higher than the CAR around those in which the ratio decreases. This provides support for our first hypothesis that the capital market responds more positively to SEOs in which the largest shareholder's shareholding ratio increases than to SEOs in which the ratio decreases. Second, the relationship between discretionary accruals during the year before an SEO and the change in the largest shareholder's shareholding ratio is negative. This is consistent with our second hypothesis that there is more earnings management to increase reported earnings during the year before SEOs in which the largest shareholder's shareholding ratio decreases than SEOs in which the ratio increases. Third, the relationship between the three-month buy and hold abnormal returns of SEOs and the change in the largest shareholders' shareholding ratio is positive. This partially supports our third hypothesis that there is higher post-SEO stock performance in cases where the largest shareholder's shareholding ratio increases than in cases where the ratio decreases. Overall, our findings show that the greater the change in the largest shareholder's shareholding ratio, the more positive the capital market reaction to the SEO announcement, the less the earnings management, and the higher the post-SEO stock performance. The results can be explained as the incentive of management to protect the wealth of existing shareholders. We make several contributions to the literature. First, we investigate SEOs by classifying SEO firms into two subsamples, those in which the largest shareholders increase their shareholding ratio and those in which they decrease their ratio, to examine management incentives to protect the wealth of existing shareholders. Our study differs from others in the literature, which focus on the type of SEO and earnings management behavior or market responses to SEOs. Classifying firms by the change in the largest shareholder's shareholding ratio is a more feasible way to examine management incentives to protect the wealth of existing shareholders than classifying them by the type of SEO, because the type of SEO is associated with the participation of existing shareholders. For example, in the case of a general cash offer, the largest shareholder can either participate in an SEO or not, or stand by the rights offer because there are no mandatory regulations. The largest shareholders can increase their shareholding ratio through third party allocation in cases where the third party is the largest shareholder. Our results showing that the largest shareholder's shareholding ratio increases through SEOs in the Korean capital market explains why the positive market response to the announcement of SEOs in Korea is different from the negative market response in other countries.