scholarly journals Earnings Management and the Long-Run Market Performance of Initial Public Offerings

1998 ◽  
Vol 53 (6) ◽  
pp. 1935-1974 ◽  
Author(s):  
Siew Hong Teoh ◽  
Ivo Welch ◽  
T.J. Wong
Keyword(s):  
Earnings Management ◽  
Initial Public Offerings ◽  
Market Performance ◽  
Public Offerings ◽  
Long Run

scholarly journals Earnings Management and Performance of IPO Firms: Evidence from India

2019 ◽  
Vol 12 (1) ◽  
pp. 39-58
Author(s):  
Deepa Mangala ◽  
Mamta Dhanda
Keyword(s):  
Earnings Management ◽  
Initial Public Offerings ◽  
Coming Out ◽  
Developed Countries ◽  
Annual Reports ◽  
Financial Reports ◽  
Public Issues ◽  
Public Offerings ◽  
Long Run ◽  
Earnings Performance

Disclosure through corporate annual reports is intended to enhance transparency and reduce information asymmetry during public issues. Ritter (1991) revealed that there is something fishy in the financial reports of the companies coming out with public issues. Earnings management has been recognised as a foremost contributor to such misleading financial reports. The short term overperformance of initial public offerings (IPO) of companies increases the expectations of potential investors and leads to a subsequent decline of performance in long run leaving the investors in distraught. The observed phenomenon is omnipresent and thus affects the investors across the globe. The present article empirically investigates the presence of earnings management in IPOs in India. The study is based on Modified Jones Model, the best known model to measure accruals earnings management. Preliminary results exhibit that earnings management in Indian IPOs is much higher than in developed countries. The study further discovers that the earnings performance of IPO companies is abnormally higher in IPO year as compared with post-offer period. Both the results taken together reinforce that post-issue earnings performance is a derivation of issue year earnings management in India.

scholarly journals Market Performance of Sponsor-Backed Initial Public Offerings: An Empirical Analysis of the German Market

2018 ◽  
Vol 4 (1) ◽  
pp. 31
Author(s):  
Jung Maximilian ◽  
Jyoti Gupta
Keyword(s):  
Initial Public Offerings ◽  
Multivariate Regression ◽  
Private Equity ◽  
Market Performance ◽  
Abnormal Returns ◽  
Special Focus ◽  
Data Set ◽  
German Market ◽  
Public Offerings ◽  
Long Run

<p><em>This paper investigates the overall market performance of Initial Public Offerings (IPOs) in Germany, by analyzing the short and long run performance of IPOs, utilizing the data from 2000-2013. Furthermore the study aims to distinguish and compare the performance of sponsor backed IPOs to non-sponsor backed IPOs, by placing a special focus on the value creating abilities of financial sponsors. The examined data set consists of 286 IPOs out of which 46 can be considered as IPOs which were backed by financial sponsor. The study suggests that, on average, IPOs significantly underperform their benchmarks. Furthermore, the evidence implies significant differences across the IPO groups with regard to performance and operational indicators. The multivariate regression shows that in the long run, private equity firms outperform their counterparts, signified by greater buy-and hold abnormal returns respectively recorded within the three-year period after the IPO. </em></p>

Opportunistic earnings management during initial public offerings: evidence from India

2016 ◽  
Vol 15 (3) ◽  
pp. 352-371 ◽  
Author(s):  
Rachappa Shette ◽  
Sudershan Kuntluru ◽  
Sunder Ram Korivi
Keyword(s):  
Earnings Management ◽  
Initial Public Offerings ◽  
Market Performance ◽  
Discretionary Accruals ◽  
Content Type ◽  
Public Offerings ◽  
Earnings Performance ◽  
The Impact

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.

scholarly journals Long-run market performance of initial public offerings in Saudi Arabia: Does sharia-compliant status matter?

2017 ◽  
Vol 14 (3) ◽  
pp. 293-298 ◽  
Author(s):  
Faisal Alqahtani ◽  
Zakaria Boulanouar
Keyword(s):  
Saudi Arabia ◽  
Initial Public Offerings ◽  
Market Performance ◽  
Abnormal Returns ◽  
Firm Level ◽  
Public Offerings ◽  
Cumulative Abnormal Returns ◽  
Equality Of Means ◽  
Long Run ◽  
One Year

This research presents a comprehensive analysis of initial public offerings (IPOs) in Saudi Arabia, using a sample of 72 IPOs examined during the period between 2004 and September 2010. To compute the market performance of the IPOs, we split the sample into two sub-samples: sharia-compliant and non-sharia-compliant and we use two methods of calculations which are buy and hold abnormal returns (BHAR) and cumulative abnormal returns (CAR). In contrast to the majority of reported outcomes worldwide, our results show that based on one-year after-market performance, on average, underperformance does not exist in the Saudi market. The regression analysis shows that the factors driving long-run market performance include initial return and ownership structure, firm level risk, age and sharia-compliant status. The highlight of this paper, however, underscored using T-test for equality of means that was performed on the two sub-samples aftermarket adjusted returns is that Sharia-compliant status significantly alters the level of one-year market performance. This result supports our hypothesis that sharia-compliant firms will enjoy superior non-negative returns compared to non-sharia compliant firms, and supports the over-reaction hypothesis. Based on this result, we introduce a new factor which we call non-sharia-compliant underperformance.

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