The Pricing of IPO Audit Specialization and Subsequent Issuer Underpricing

2021 ◽  
Author(s):  
Jung Eun Park ◽  
Norman Massel
Keyword(s):  
Empirical Evidence ◽  
Initial Public Offering ◽  
Capital Markets ◽  
Discretionary Accruals ◽  
Costs And Benefits ◽  
Lower Likelihood ◽  
Financial Misstatement ◽  
Public Offering ◽  
Auditor Specialization

We study the costs and benefits to the issuer of engaging an initial public offering (IPO) auditor specialist. We measure IPO auditor specialization and then find that IPO specialist auditors earn significant fee premiums relative to IPO auditors without specialization and that clients with an IPO specialist auditor exhibit lower levels of underpricing relative to clients without an IPO specialist auditor. We also demonstrate that IPO specialist auditors provide higher quality audits than IPO auditors without IPO audit specialization, finding that their IPO clients have a lower likelihood of financial misstatement and have lower discretionary accruals. Collectively, our results have important implications for the auditing profession and capital markets because we demonstrate empirical evidence of the costs and benefits of engaging IPO specialist auditors.

Part III Beyond the Transatlantic Corridor, 10 The Paradoxes of Islamic Capital Markets

2021 ◽  
Author(s):  
Jordan Cally
Keyword(s):  
Initial Public Offering ◽  
Capital Markets ◽  
International Institutions ◽  
International Markets ◽  
Islamic Finance ◽  
International Capital ◽  
Gulf Region ◽  
International Capital Markets ◽  
Saudi Aramco ◽  
Public Offering

This chapter describes Islamic capital markets. Led by Malaysia and its distinct Islamic Market, Bursa Malaysia-I, Islamic finance has entered the mainstream of international capital markets, primarily in the form of ‘Islamic bonds’ (sukuk) and fund products. Saudi Arabia, with its well-publicized Saudi Aramco initial public offering (IPO) in 2019, raised, less successfully, a different flag in the international markets. Islamic finance has infiltrated conventional markets too. Non-Islamic issuers, sovereigns, corporates and international institutions, have issued sukuk, attracted by the wash of liquidity and investors in the Gulf region. Indeed, Islamic finance has been rubbing shoulders with modern conventional finance for several decades now. As ‘conventional’ finance has become less ‘conventional’, shari'a compliant finance has become more accepted. Impediments to growth persist; the imperviousness to standardization and the artificiality of the structures underlying the financial products increase costs and possibly risk, making the products uncompetitive. However, cost is not the only consideration in the marketplace. With greater interest in ethical and ESG (environmental, social, and governance) investing, Islamic finance may be the path or the way to future markets.

Price Determination in Public Offering and Evaluation Methods

2015 ◽  
pp. 144-165
Author(s):  
Ümit Hacıoğlu ◽  
Hasan Dinçer ◽  
Zuhal Akça
Keyword(s):  
Performance Evaluation ◽  
Initial Public Offering ◽  
Capital Markets ◽  
Evaluation Methods ◽  
Price Determination ◽  
Key Factors ◽  
Advanced Economies ◽  
Ipo Pricing ◽  
And Performance ◽  
Public Offering

The latest financial situation in capital markets in advanced economies, emerging markets, and the Euro zone illustrates that volatility and risks related to global economic activity and global financial markets have impact on local capital markets and directly affects the value of company stocks even though an investor diversified his/her risk by investing in a portfolio. The initial public offering process, performance evaluation methods, and price determination became key factors for companies and investors. In this chapter, advantages and disadvantages of IPO, pricing methods and performance evaluation methods are assessed.

Price Determination in Public Offering and Evaluation Methods

2017 ◽  
pp. 1293-1315
Author(s):  
Ümit Hacıoğlu ◽  
Hasan Dinçer ◽  
Zuhal Akça
Keyword(s):  
Performance Evaluation ◽  
Initial Public Offering ◽  
Capital Markets ◽  
Evaluation Methods ◽  
Price Determination ◽  
Key Factors ◽  
Advanced Economies ◽  
Ipo Pricing ◽  
And Performance ◽  
Public Offering

The latest financial situation in capital markets in advanced economies, emerging markets, and the Euro zone illustrates that volatility and risks related to global economic activity and global financial markets have impact on local capital markets and directly affects the value of company stocks even though an investor diversified his/her risk by investing in a portfolio. The initial public offering process, performance evaluation methods, and price determination became key factors for companies and investors. In this chapter, advantages and disadvantages of IPO, pricing methods and performance evaluation methods are assessed.

scholarly journals CAN ACCOUNTING INFORMATION ACT AS A PROXY FOR EX ANTE UNCERTAINTY IN INITIAL PUBLIC OFFERINGS?

2003 ◽  
Vol 5 (2) ◽  
pp. 249 ◽  
Author(s):  
Tatang Ary Gumanti
Keyword(s):  
Empirical Evidence ◽  
Initial Public Offerings ◽  
Initial Public Offering ◽  
Accounting Information ◽  
Firm Risk ◽  
Public Offerings ◽  
Accounting Numbers ◽  
Ex Ante ◽  
Value Of Firm ◽  
Public Offering

This paper reviews and summarizes previous works and the rationale for the proposition that accounting information is in fact value relevant in the determination of an initial public offering IPO).Theoretical and empirical evidence has indicated that certain accounting measures can he used as proxies for total firm risk, that is, they could determine the riskiness of a corporation. The literature also advocates that accounting information is relevant in determining the value and thus the riskiness of a corporation through the use of accounting analysis. Since most of the information available in the prospectus is accounting information, it is arguable that this information represents a potential source for assessing the issuing firm. Some scholars have also advocated the possibility of using accounting information in assessing the value of firm making an IPO. Numerous papers have provided analytical and empirical evidence of the association between accounting numbers and the value of IPOs. The conclusion generally comes to show that information in the prospectus is value relevant concerning the IPO. The paper shows that it is indeed an arguable to use accounting information in the valuation of an IPO. Accordingly, it is an empirical issue whether accounting information has the property in explaining the ex-ante uncertainty of an IPO.

Ownership and Operating Performance of Spanish Family IPO Firms

2020 ◽  
pp. 210-233
Author(s):  
Fuencisla Martínez Lobato ◽  
C. José García Martín ◽  
José Emilio Farinós Viñas
Keyword(s):  
Empirical Evidence ◽  
Initial Public Offering ◽  
Ownership Structure ◽  
Family Firms ◽  
Operating Performance ◽  
Operational Performance ◽  
The Family ◽  
Spanish Family ◽  
Public Offering ◽  
A Company

Previous studies have shown the existence of a relationship between the ownership structure of a company and its operational performance. In this context, the empirical evidence reveals that after an initial public offering (IPO), companies experience a decline in their operational performance. In this research, the authors investigate whether the characteristics of Spanish family firms led to a different operating behavior with respect to non-family companies when they go public through an IPO. The results show that the particularities of the family firm do not turn into significant differences in operational performance after the listing process.

Family Business Group Expansion Through IPOs: The Role of Internal Capital Markets in Financing Growth While Preserving Control

2020 ◽  
Vol 66 (11) ◽  
pp. 5191-5215
Author(s):  
Ronald W. Masulis ◽  
Peter K. Pham ◽  
Jason Zein
Keyword(s):  
Initial Public Offering ◽  
Family Business ◽  
Capital Markets ◽  
Market Access ◽  
Scale Up ◽  
Seasoned Equity Offerings ◽  
Equity Offerings ◽  
Internal Capital ◽  
Family Business Group ◽  
Public Offering

Using data from 44 countries, we document a new channel through which a family business group’s internal capital market supports its members. We find that groups use internal capital to incubate difficult-to-finance projects, making it feasible for them to rapidly scale up, thus facilitating their initial public offering (IPO) market access. This IPO support role is particularly valuable when groups find capital-raising through seasoned equity offerings less attractive because of control-retention concerns and in capital markets with high new-firm financing barriers. Unlike carve-outs employed as a corporate restructuring strategy, group-affiliated IPOs primarily appear to serve a group’s expansion goals rather than its liquidation needs. This paper was accepted by Gustavo Manso, finance.

Impact of IPO grading on earnings management

2015 ◽  
Vol 13 (2) ◽  
pp. 142-158 ◽  
Author(s):  
Yogesh Maheshwari ◽  
Khushbu Agrawal
Keyword(s):  
Earnings Management ◽  
Initial Public Offering ◽  
Design Methodology ◽  
Discretionary Accruals ◽  
Alternative Measure ◽  
Cross Sectional ◽  
Content Type ◽  
Public Offering ◽  
The Impact ◽  
First Time

Purpose – This paper aims to examine the impact of initial public offering (IPO) grading on earnings management by Indian companies in their IPOs. Specifically, it investigates whether earnings management significantly differs in the pre-IPO grading regime and post-IPO grading regime. Further, it examines whether earnings management significantly differs between high-graded and low-graded IPOs. Design/methodology/approach – The cross-sectional modified Jones model is used to obtain the discretionary accruals, a proxy for earnings management. The impact of IPO grading on earnings management is assessed using multiple regression analysis. Findings – Earnings management is significantly lower in graded IPOs as compared to the ones that are not graded. Further, among the graded IPOs, the high-graded IPOs exhibit lower earnings management as compared to the low-graded IPOs. The findings are robust to the use of an alternative measure for discretionary accruals. Originality/value – IPO grading in India is a unique certification mechanism, introduced for the first time in any market. This paper establishes the efficacy of this mandatory certification mechanism in reducing earnings management. The findings could be valuable to issuer companies, investors and market regulators.

scholarly journals Fenomena Manajemen Laba dalam IPO (Initial Public Offering); Studi dengan Menggunakan Model Aharony dan Friedlan

2011 ◽  
Vol 1 (2) ◽  
pp. 151
Author(s):  
Lego Waspodo
Keyword(s):  
Initial Public Offering ◽  
Stock Exchange ◽  
Discretionary Accruals ◽  
Income Smoothing ◽  
Jones Model ◽  
Before And After ◽  
One Year ◽  
Public Offering ◽  
Differentiation Test

The research was done on PT Multistrada Arah Sarana, during 2002 to 2007, using modified- Jones Model. The research used two means differentiation tests. Based on the result of two means differentiation test, it can be said that there was no income increasing discretionary accruals one year before initial public offering (on 2004). Issuers also did not do income-decreasing discretionary accruals on one year after initial public offering and two years after initial public offering. Hipotesis 1 and hipotesis 2 a and 2 b were refused, or can not be accepted. So, it can be concluded that PT Multisrada Arah Sarana did not do income smoothing before and after initial public offering on Indonesia Stock Exchange. Keywords: income smoothing, income increasing discretionary accruals, income decreasing discretionary accruals, initial public offering.

scholarly journals The role of auditors in detecting creative accounting: Singaporean and Australian evidence

2011 ◽  
Vol 8 (3) ◽  
pp. 124-144
Author(s):  
Rusmin Rusmin
Keyword(s):  
Earnings Management ◽  
Empirical Evidence ◽  
Discretionary Accruals ◽  
Auditor Independence ◽  
Negative Association ◽  
Creative Accounting ◽  
Auditor Quality ◽  
Auditor Specialization ◽  
Non Audit Services

This study examines the association between the magnitude of earnings management and two characteristics of auditor value - auditor independence and auditor quality. As earnings management, auditor independence and auditor quality are unobservable the study uses absolute discretionary accruals, the ratio of non-audit to total fees and auditor industry specialisation as respective proxies. This study finds no empirical evidence that non-audit services are associated with firms’ discretionary accruals. This result suggests that the provision of non-audit services by the incumbent auditor does not compromise independence. This study presents evidence of a negative association between auditor specialization and the earnings management indicator. This finding infers that the magnitude of earnings management amongst firms engaging the services of a specialist is significantly lower than firms purchasing audit services from a non-specialist auditor

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