Journal ArticleDOI
Opportunistic earnings management during initial public offerings: evidence from India
TLDR
In this article, the authors examined the impact of initial public offerings (IPO)-year opportunistic earnings management on long-term market and earnings performance and found that the quality of earnings during the IPO-year is lower than those in the post-IPO years.Abstract:
Purpose
This paper aims to examine the impact of initial public offerings (IPO)-year opportunistic earnings management on long-term market and earnings performance.
Design/methodology/approach
A sample of 150 book-built IPOs over 2001-2006 are analysed based on industry adjusted return on sales and industry adjusted return on assets for six post-IPO years. The quality of earnings is measured in two ways using discretionary accruals and Beneish manipulation score. Modified Jones model is used to estimate the expected accruals and to compute the discretionary accruals for each IPO firm year. Regression model is used to examine the impact of IPO-year quality of earnings on future earnings performance.
Findings
The paper finds that earnings and market performance of IPO companies are abnormally higher in the IPO-year, as compared to the post-IPO years. Similarly, the quality of earnings during the IPO-year is lower than those in the post-IPO years. The results also show that the opportunistic earnings management in IPO-year has significant negative impact on the long-term adjusted earnings and market performance.
Research limitations/implications
The present study is confined to the period from 2001 to 2006 for the purpose of post-IPO analysis for a period of six post-IPO years. Thus, the conclusions of this study are to be viewed with this limitation.
Originality/value
This paper is the first study based on the Indian context to examine the relationship between the quality of earnings of the IPO firm and long-term earnings and market performance.read more
Citations
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Journal ArticleDOI
Do institutional investors reinforce or reduce agency problems? Earnings management and the post-IPO performance
TL;DR: In this article, the dual roles of institutional investors in earnings management during initial public offerings (IPOs) were investigated, and the authors found that firms with high institutional ownership experience superior post-IPO stock returns and operating performance.
Journal ArticleDOI
Earnings Management, Related Party Transactions and Corporate Performance: The Moderating Role of Internal Control
Grzegorz Zimon,Andrea Appolloni,Hossein Tarighi,Seyedmohammadali Shahmohammadi,Ebrahim Daneshpou +4 more
TL;DR: In this paper, the impacts of earnings management and related party transactions (RPTs) on corporate financial performance in an emerging market, Iran, were investigated, and the moderating role of internal control weakness was examined in the relationship between them.
Journal ArticleDOI
Pre-IPO earnings management: Evidence from India
TL;DR: In this paper, the authors find evidence that Indian firms which utilize reputable investment banks are less likely to manipulate pre-IPO earnings and also support the capital market staging hypothesis in India.
Journal ArticleDOI
Influence of firm size and firm age on classification shifting: an empirical study on listed firms in India
TL;DR: In this paper, the authors identify the factors affecting revenue shifting and expense shifting and show that large and old firms are engaged in revenue shifting, whereas small and young firms prefer expense shifting over revenue shifting for reporting inflated operating profits.
Journal ArticleDOI
Earnings Management and Performance of IPO Firms: Evidence from India:
Deepa Mangala,Mamta Dhanda +1 more
TL;DR: In this paper, the authors proposed that disclosure through corporate annual reports is intended to enhance transparency and reduce information asymmetry during public issues, and that there is something fishy about the corporate annual report.
References
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Posted Content
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