Earnings management and long-run stock performance following private equity placements

2009 ◽  
Vol 34 (2) ◽  
pp. 225-245 ◽  
Author(s):  
De-Wai Chou ◽  
Michael Gombola ◽  
Feng-Ying Liu
Keyword(s):  
Earnings Management ◽  
Private Equity ◽  
Stock Performance ◽  
Long Run

scholarly journals Long-run Stock Performance of Equity-Issuing Firms: The Case of Private Placements in Singapore

2002 ◽  
Vol 05 (03) ◽  
pp. 417-438 ◽  
Author(s):  
Sheng-Syan Chen ◽  
Kim Wai Ho ◽  
Cheng-Few Lee ◽  
Gillian H. H. Yeo
Keyword(s):  
Earnings Management ◽  
Small Firms ◽  
Ownership Concentration ◽  
Positive Relation ◽  
Stock Performance ◽  
Listed Firms ◽  
Long Run ◽  
Private Placements ◽  
Growth Prospects ◽  
Book To Market Ratio

We find that Singapore listed firms which have conducted private placements subsequently experience long-run stock underperformance. The long-run underperformance is more severe for small firms and firms with a higher book-to-market ratio. This suggests that small firms and firms with poorer growth prospects are more likely to time the issue when the stock is temporarily overvalued. Further more, we find a positive relation between the long-run stock performance and the change in ownership concentration of the issuing firms, which is consistent with the alignment-of-interests hypothesis. We do not find evidence supporting the earnings-management hypothesis.

scholarly journals IPO’s Long-Run Performance: Hot Market versus Earnings Management

2021 ◽  
Vol 14 (3) ◽  
pp. 132
Author(s):  
Tsai-Yin Lin ◽  
Jerry Yu ◽  
Chia-Yi Lin
Keyword(s):  
Earnings Management ◽  
Information Asymmetry ◽  
Explanatory Power ◽  
Market Condition ◽  
Relative Importance ◽  
Long Run ◽  
Hot Market

One of the IPO-related anomalies that have been well-discussed in the finance literature is the IPO’s long-running underperformance. Two of the major explanations of that phenomenon are: “Hot market” and earnings management. This study investigates the relative importance of these two explanations to the IPO’s long-run underperformance. Our results show that although both hot market and earnings management play a role in explaining IPO’s long-run performance in their own rights, earnings management no longer exhibits significant explanatory power when the IPOs are issued in the cold market. While the IPOs that are issued in the hot market still tend to underperform in the long run even if the firms do not engage in earnings management. Our findings are consistent with the literature related to the information asymmetry in IPO market. And, because the information asymmetry is more severe in hot market condition, IPOs issued in hot market tend to exhibit poorer returns than those issued in cold market.

scholarly journals Equity Incentives and Earnings Management

2005 ◽  
Vol 80 (2) ◽  
pp. 441-476 ◽  
Author(s):  
Qiang Cheng ◽  
Terry D. Warfield
Keyword(s):  
Earnings Management ◽  
Stock Ownership ◽  
Stock Performance ◽  
Future Earnings ◽  
Equity Incentives ◽  
Time Period ◽  
Earnings Surprises ◽  
The Future

This paper examines the link between managers' equity incentives—arising from stock-based compensation and stock ownership—and earnings management. We hypothesize that managers with high equity incentives are more likely to sell shares in the future and this motivates these managers to engage in earnings management to increase the value of the shares to be sold. Using stock-based compensation and stock ownership data over the 1993–2000 time period, we document that managers with high equity incentives sell more shares in subsequent periods. As expected, we find that managers with high equity incentives are more likely to report earnings that meet or just beat analysts' forecasts. We also find that managers with consistently high equity incentives are less likely to report large positive earnings surprises. This finding is consistent with the wealth of these managers being more sensitive to future stock performance, which leads to increased reserving of current earnings to avoid future earnings disappointments. Collectively, our results indicate that equity incentives lead to incentives for earnings management.

Underpricing and Long-Run Performance Patterns of European Private-Equity-Backed and Non-Private-Equity-Backed IPOs

2006 ◽  
Vol 9 (4) ◽  
pp. 16-47 ◽  
Author(s):  
Clas Bergström ◽  
Daniel Nilsson ◽  
Marcus Wahlberg
Keyword(s):  
Private Equity ◽  
Long Run ◽  
Performance Patterns

Are unsolicited ratings biased? Evidence from long-run stock performance

2014 ◽  
Vol 42 ◽  
pp. 326-338 ◽  
Author(s):  
Soku Byoun ◽  
Jon A. Fulkerson ◽  
Seung Hun Han ◽  
Yoon S. Shin
Keyword(s):  
Stock Performance ◽  
Long Run ◽  
Unsolicited Ratings
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