Earnings Management and IPO Anomalies—Evidence from Indian Stock Market

This study examines the relationship between the extent of earnings management in a firm, the level of underpricing during an initial public offering (IPO), and their long-term performance. Earnings management has been acknowledged as a matter of concern during IPOs since long; however, its relationship with underpricing and long-term returns remained inconclusive in emerging markets like India. Using a sample of Indian IPO firms, this study finds that firms that manage accruals aggressively in the pre-IPO period have high initial returns and subsequently low stock returns in the post-IPO period. This study also observed that firms that have used abnormal accruals more conservatively while reporting earnings have better returns in the third year after IPO compared to the firms that reported more aggressively. The results are in consonance with the theory of information asymmetry and suggest that valuation of an IPO firm becomes ambiguous with high level of earnings management, which leads to higher underpricing.

Zeszyty Naukowe Uniwersytetu Szczecińskiego Finanse Rynki Finansowe Ubezpieczenia ◽

Earnings manipulation on emerging and developed markets: long-term performance consequences after initial public offering

10.18276/frfu.2015.75-24 ◽

2015 ◽

Vol 2015 (75) ◽

pp. 297-308

Author(s):

Joanna Lizińska

Keyword(s):

Initial Public Offering ◽

Earnings Manipulation ◽

Developed Markets ◽

Performance Consequences ◽

Public Offering ◽

Long Term Performance ◽

IPO underpricing and long-term performance in China: the perspective of price limit policy

Managerial Finance ◽

10.1108/mf-08-2020-0428 ◽

2021 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Yuxin Wang ◽

Guanying Wang

Keyword(s):

Initial Public Offering ◽

Stock Exchange ◽

Ipo Underpricing ◽

Content Type ◽

Price Limit ◽

Good Policy ◽

Public Offering ◽

Long Term Performance ◽

PurposeThe purpose of this paper is to explore how the price limit policy implemented in 2014 affects initial public offering (IPO) underpricing and long-term performance in China.Design/methodology/approachThe data are the IPOs from Shanghai Stock Exchange (SSE) and Shenzhen Stock Exchange (SZSE) between 2004 and 2018. The data are firstly divided into the IPOs before the price limit policy and the IPOs after the price limit policy according to the time of issuance. Then the two groups are divided into 4 subsamples according to the market blocks and the P/E ratio. The authors use multiple regression models to explore the effect of price limit policy in each subsample.FindingsThe first-day price limit system for IPOs is similar to the upward fuse mechanism, the purpose of which is to suppress IPO underpricing. However, this study finds that the policy does not suppress IPO underpricing, but increases the underpricing rate in all subsamples. Besides, the long-term performance in each subsample is different from each other. Main Board stocks’ long-term performance is worse after the policy. The policy makes Small and Medium Enterprise Board (SME Board) and Growth Enterprise Market Board (GEM Board) stocks with high P/E ratios perform better in the long term. For SME Board and GEM Board stocks with low P/E ratios, the policy makes no significant effect.Practical implicationsGood policy intentions may sometimes lead to counterproductive effects. However, since the long-term performance of each subsample is different, it is difficult to judge whether the policy should continue to be implemented or cancelled. Implementing different policies for different subsamples may be a better way to solve this problem.Originality/valueThis paper contributes to the study of IPO underpricing and long-term performance from the perspective of price limit policy.

MANAJEMEN LABA, RETURN SAHAM, DAN KINERJA OPERASI SEBAGAI PEMODERASI

Media Riset Akuntansi Auditing & Informasi ◽

10.25105/mraai.v15i2.2068 ◽

2017 ◽

Vol 15 (2) ◽

pp. 133

Author(s):

Farid Addy Sumantri ◽

Purnamawati .

Keyword(s):

Earnings Management ◽

Stock Returns ◽

Initial Public Offering ◽

Stock Return ◽

Operating Performance ◽

Abnormal Returns ◽

Return On Assets ◽

One Year ◽

Public Offering ◽

The purpose of this study was to determine the indications of the practice of earnings management at the time of the IPO, one year after the IPO, and two years after the IPO. This study also examined the effect of earnings management on stock returns and operating performance in moderating the relationship between earnings management and stock returns.The study sample comprised 33 firms that go public in the year 2007 to 2011 using a purposive sampling method. Earnings management is proxied by discretionary accruals using the Modified Jones Model, which used proxy for the stock return is cummulative abnormal returns (CAR), while for the company's operating performance used proxy for the return on assets (ROA).The results showed that there were indications of earnings management at the time of the IPO, one year after the IPO, and two years after the IPO with a lower profit rate. No effect on earnings management is proxied by stock return cummulative abnormal returns (CAR). Operating performance of the company also can not moderate the relationship between earnings management with stock return. Keywords: Earning Management, Initial Public Offering, Cummulative Abnormal Return, Return On Asset

Earnings Quality and Ownership Structure: The Role of Private Equity Sponsors

The Accounting Review ◽

10.2308/accr.2009.84.3.623 ◽

2009 ◽

Vol 84 (3) ◽

pp. 623-658 ◽

Cited By ~ 69

Author(s):

Sharon P. Katz

Keyword(s):

Initial Public Offering ◽

Stock Price ◽

Private Equity ◽

Earnings Quality ◽

Price Performance ◽

Before And After ◽

Public Offering ◽

Long Term Performance ◽

ABSTRACT: This study explores how firms' ownership structures affect their earnings quality and long-term performance. Focusing on a unique sample of private firms for which there is financial data available in the years before and after their initial public offering (IPO), I differentiate between those that have private equity sponsorship (PE-backed firms) and those that do not (non-PE-backed firms). The findings indicate that PE-backed firms generally have higher earnings quality than those that do not have PE sponsorship, engage less in earnings management, and report more conservatively both before and after the IPO. Further, PE-backed firms that are majority-owned by PE sponsors exhibit superior long-term stock price performance after they go public. These results stem from the professional ownership, tighter monitoring, and reputational considerations exhibited by PE sponsors.

MANAJEMEN LABA, RETURN SAHAM, DAN KINERJA OPERASI SEBAGAI PEMODERASI

Media Riset Akuntansi Auditing & Informasi ◽

10.25105/mraai.v13i2.1743 ◽

2017 ◽

Vol 13 (2) ◽

pp. 61 ◽

Cited By ~ 1

Author(s):

Farid Addy Sumantri ◽

Purnamawati ,

Keyword(s):

Earnings Management ◽

Stock Returns ◽

Initial Public Offering ◽

Stock Return ◽

Operating Performance ◽

Abnormal Returns ◽

Return On Assets ◽

One Year ◽

Public Offering ◽

The purpose of this study was to determine the indications of the practice of earnings management at the time of the IPO, one year after the IPO, and two years after the IPO. This study also examined the effect of earnings management on stock returns and operating performance in moderating the relationship between earnings management and stock returns. The study sample comprised 33 firms that go public in the year 2007 to 2011 using a purposive sampling method. Earnings management is proxied by discretionary accruals using the Modified Jones Model, which used proxy for the stock return is cummulative abnormal returns (CAR), while for the company’s operating performance used proxy for the return on assets (ROA). The results showed that there were indications of earnings management at the time of the IPO, one year after the IPO, and two years after the IPO with a lower profit rate. No effect on earnings management is proxied by stock return cummulative abnormal returns (CAR). Operating performance of the company also can not moderate the relationship between earnings management with stock return. Keywords: Earning Management, Initial Public Offering, Cummulative Abnormal Return, Return On Asset

Groupon: let's make a deal?

The CASE Journal ◽

10.1108/tcj-05-2014-0033 ◽

2015 ◽

Vol 11 (1) ◽

pp. 26-38

Author(s):

Susan White

Keyword(s):

Social Media ◽

Initial Public Offering ◽

Content Type ◽

Media Companies ◽

Secondary Sources ◽

Long Run ◽

Public Offering ◽

Media Firms ◽

Synopsis Groupon, an online coupon company, was one of many companies that considered an initial public offering (IPO) during what might be a second technology/internet/social media IPO boom in 2011. Some companies chose to postpone their IPOs, while others took advantage of the media attention focussed on technology companies, and in particular, social media firms. Should investors hop on the tech IPO bandwagon, or hold off to better evaluate the long-term prospects of tech companies, and in particular social media companies? Would the valuation of Groupon justify an investment in IPO shares? Research methodology The case was researched from secondary sources, using Groupon's IPO filing information, news articles about the IPO and industry research sources, such as IBIS World. Relevant courses and levels This case is appropriate for an advanced undergraduate or MBA corporate finance or investment elective. Most introductory finance classes do not have the time to cover later chapters in a finance textbook, where information about IPOs is generally found. It could also be used at the end of a core finance course, where the instructor wanted to introduce this topic through a case study of a hard-to-value internet-based company to illustrate the difficulties in setting IPO prices. The case could also be used in an equity analysis class, an entrepreneurial finance class or an investment class, to spur discussion about valuing an internet company and choosing appropriate investments for pension fund investing. This case could also be used in a strategy class, focussing on the five forces question, and eliminating the valuation question. Theoretical basis There is a great deal of literature about IPOs and their long-term performance. An excellent source is Jay R. Ritter's research, http://bear.warrington.ufl.edu/ritter, which has a longer time period and more data than could be contained in this case. IPO puzzles include persistent undervaluing of IPOs; in other words, the offer price is lower than, and sometimes substantially lower than, the first day close price. A second issue is the generally poorer long-run performance of companies after their IPO when compared to similar firms that did not do an IPO.

Adsorption of actinides within speleothems

Mineralogical Magazine ◽

10.1180/minmag.2016.080.013 ◽

2016 ◽

Vol 80 (5) ◽

pp. 765-780 ◽

Cited By ~ 1

Author(s):

P. Sengupta ◽

J. Sanwal ◽

N. L. Dudwadkar ◽

S. C. Tripathi ◽

P. M. Gandhi

Keyword(s):

Valence State ◽

Experimental Studies ◽

Distribution Coefficients ◽

Nuclear Wastes ◽

Lesser Himalayas ◽

Safety Assessments ◽

High Level ◽

Long Term Performance ◽

AbstractStalagmites and stalactites, as observed within natural caves, may develop inside geological repositories during constructional and post-operational periods. It is therefore important to understand actinide sorption within such materials. Towards this, experimental studies were carried out with 233U, 238Np (VI), 238Np (IV), 239Pu and 241Am radiotracers using natural speleothem samples collected from the Dharamjali cave of the Kumaon Lesser Himalayas, India. Petrological/mineralogical studies showed that natural speleothems have three general domains: (1) columnar calcite; (2) microcrystalline calcite; and (3) botryoidal aragonite – each with ferruginous materials. Results showed that all domains of speleothems can take up >99% actinides, irrespective of valence state and pH (1–6 range) of the solution. However, distribution coefficients were found to be at a maximum in aragonite for most of the actinides. Such data are very important for long-term performance and safety assessments of the deep geological repositories planned for the disposal of high-level nuclear wastes.

CSR portfolio characteristics and performance outcomes: examining the impacts of CSR portfolio diversity and dynamism

Social Responsibility Journal ◽

10.1108/srj-10-2020-0414 ◽

2021 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Kyle Turner ◽

Craig A. Turner ◽

William H. Heise

Keyword(s):

Firm Performance ◽

Dynamic Range ◽

Performance Outcomes ◽

Short Term ◽

Content Type ◽

Short And Long Term ◽

Long Term Performance ◽

Term Performance ◽

Purpose The purpose of this paper is to introduce and test a portfolio view of a firm’s corporate social responsibility (CSR) activities. Drawing from stakeholder theory and the dynamic capabilities literature, the authors introduce CSR portfolio diversity and dynamism as key portfolio characteristics that have differential impacts across short- and long-term performance contexts. Design/methodology/approach The study draws from the Kinder, Lydenberg and Domini database to examine CSR portfolio diversity and dynamism across seven dimensions of CSR activities. The authors test the direct and indirect relationships between CSR portfolio characteristics and both short- and long-term performance outcomes to assess the opportunities and challenges associated with managing a diverse and dynamic CSR portfolio. Findings The findings suggest that a diverse portfolio of CSR activities positively impacts long-term performance; however, CSR portfolio diversity yields negative performance outcomes in the short-term. The authors also find that CSR portfolio dynamism moderates the relationship between CSR level and firm performance, such that a dynamic portfolio of CSR positively moderates the relationship between a firm’s CSR level and long-term performance; however, it negatively moderates the relationship between CSR level and short-term performance. Originality/value This study integrates insights from the literature that examine the independent effects of individual CSR activities and the broader perspective that assesses the aggregated summation of CSR activities in relation to firm performance. By taking a portfolio perspective, the present study provides a unique integration of these two research streams to examine the performance implications of engaging in a diverse and dynamic range of CSR activities.

The contrasting moderating effect of exploration on the relationship between stock options/stock ownership and a firm’s long-term performance

Management Decision ◽

10.1108/md-07-2017-0645 ◽

2018 ◽

Vol 56 (9) ◽

pp. 1956-1968 ◽

Cited By ~ 2

Author(s):

Gun Jea Yu ◽

Joonkyum Lee

Keyword(s):

Stock Options ◽

Chief Executive ◽

Moderating Effect ◽

Stock Ownership ◽

Content Type ◽

And Performance ◽

Long Term Performance ◽

Term Performance ◽

Purpose The purpose of this paper is to investigate the contrasting moderating effect of a firm’s exploration on the relationship between the two types of long-term incentives (stock options/stock ownership) for the chief executive officers and a firm’s long-term performance. Even though the two types of incentives are designed to improve long-term performance, the degrees of impact on long-term performance differ. Based on behavioral agency theory, this study theoretically and empirically examines the role of a firm’s exploration on the above relationship. Design/methodology/approach This study used three archival sources to obtain data on stock options, stock ownership, patents and exploration, financial measures, and others. Based on a sample of 1,963 firms in various industries from 1995 to 2006, this study tested the moderating effect of a firm’s exploration on the relationship between stock options/ownership and a firm’s performance. Findings This study reveals the contrasting moderating effect of a firm’s exploration on the relationship between stock options/ownership and a firm’s long-term performance: a positive moderating effect on the relationship between stock options and performance and a negative moderating effect on the relationship between stock ownership and performance. In addition, empirical evidence was added on the inverted U-shaped relationship between stock ownership and a firm’s long-term performance. Originality/value There is little research on a firm’s internal characteristics that strengthen or weaken the effects of stock options and stock ownership on firm performance. This study demonstrates the differential moderating effects of exploration on the relationship between stock options/stock ownership and long-term performance. Such effects of exploration come from the different risk features of stock options and stock ownership. The key implication is that stock options could be more effective than stock ownership to enhance a firm’s long-term performance when a firm has a strong exploration orientation.

Effect of Thickness and Annealing on Stress in Tantalum and Tantalum Nitride Thin Film Hard Coatings

MRS Proceedings ◽

10.1557/proc-436-529 ◽

1996 ◽

Vol 436 ◽

Cited By ~ 1

Author(s):

Ranjana Saha ◽

Rama B. Inturi ◽

John A. Barnard

Keyword(s):

Thin Film ◽

Hard Coatings ◽

Tantalum Nitride ◽

Film Stress ◽

Thin Film Stress ◽

Stress Measuring ◽

Long Term Performance ◽

Term Performance ◽

AbstractAn understanding of the relationship between stress and the other properties of thin films is extremely useful in the design of hard coatings for long term performance. In our earlier study, sputtered Ta and Ta(N) films were found to exhibit promising hard coating properties. For example, nano hardness as high as 30 GPa was observed in the nitride (pN2 = 0.100 mTorr) films. In this work, we study the variation in the stress in these films with respect to film thickness and annealing. Films in six different thicknesses (50, 250, 350, 500, 750, and 1000 nm) were deposited on oxide coated Si (111) wafers. Stresses in the films in the as-deposited state and as a function of temperature (300°C) were determined using a thin film stress measuring unit.