Journal ArticleDOI
Earnings Management: IPO Valuation and Subsequent Performance
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In this article, the authors examine the role of earnings management by issuers prior to making initial public offerings (IPOs) and find that pre-IPO abnormal accruals are positively related to initial firm value.Abstract:
We examine the role of earnings management by issuers prior to making initial public offerings (IPOs). Our results indicate that pre-IPO abnormal accruals are positively related to initial firm value. Entrepreneurs may seek to increase their offering proceeds, temporarily deceiving investors by opportunistically manipulating earnings through accruals management before going public. This would imply a negative relationship between abnormal accruals around the offer date and subsequent firm performance. Confirming earlier studies, we find that abnormal accruals during the offer year are significantly negatively related to subsequent firm stock returns. In addition, we find that abnormal accruals in the preceding year are also significantly negatively related to subsequent performance. Moreover, this result persists even for returns that are risk-adjusted using the multifactor CAPM of Eckbo, Masulis, and Norli (2000). Thus, it appears that aggressive pre-IPO earnings management both increases IPO proceeds an...read more
Citations
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Journal ArticleDOI
Audit committee, board of director characteristics, and earnings management
TL;DR: In this paper, the authors examined whether audit committee and board characteristics are related to earnings management by the firm and found a negative relation between audit committee independence and abnormal accruals.
Journal ArticleDOI
Earnings management, stock issues, and shareholder lawsuits
TL;DR: This article found that abnormal accounting accruals are unusually high around stock offers, especially high for firms whose offers subsequently attract lawsuits, and that such accrual reversals tend to reverse after stock offers and are negatively related to post-offer stock returns.
Journal ArticleDOI
The Antecedents and Consequences of Top Management Fraud
TL;DR: In this article, the authors analyze fraud by senior executives in terms of its nature, scope, antecedents, and consequences, and draw on the fields of psychology, sociology, economics, and criminology to identify societal-, industry, and firm-level antecedent of management fraud and individual differences that enhance or neutralize the likelihood and degree of such fraud.
Journal ArticleDOI
Do CEO Stock Options Prevent or Promote Fraudulent Financial Reporting
TL;DR: In this paper, the authors contrast the conventional view that CEO stock options aid corporate governance by reducing moral hazard with the proposal that they may subvert sound corporate governance, and propose a new set of rules for the allocation of stock options.
Journal ArticleDOI
Board Monitoring and Earnings Management Pre- and Post-IFRS ☆
TL;DR: In this article, the authors explore how two board characteristics (i.e., board independence and the existence of an audit committee) impact earnings management after the mandatory application of IFRS.
References
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Journal ArticleDOI
A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity
TL;DR: In this article, a parameter covariance matrix estimator which is consistent even when the disturbances of a linear regression model are heteroskedastic is presented, which does not depend on a formal model of the structure of the heteroSkewedness.
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Earnings Management During Import Relief Investigations
TL;DR: In this article, the authors test whether firms that would benefit from import relief attempt to decrease earnings through earnings management during import relief investigations by the United States International Trade Commission (ITC).
Posted Content
Detecting Earnings Management
TL;DR: In this paper, the authors evaluate alternative models for detecting earnings management by comparing the specification and power of commonly used test statistics across the measures of discretionary accruals generated by each model.
Journal ArticleDOI
An empirical evaluation of accounting income numbers
Ray Ball,Philip Brown +1 more
TL;DR: In this article, it is argued that income numbers cannot be defined substantively, that they lack "meaning" and are therefore of doubtful utility, and the argument stems in part from the patchwork development of account-based theories.
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Informational asymmetries, financial structure, and financial intermediation
TL;DR: This paper argued that the average quality is likely to be low, with the consequence that even projects which are known (by the entrepreneur) to merit financing cannot be undertaken because of the high cost of capital resulting from low average project quality.