Earnings management and listing day performance of IPOs in India

PurposeThe purpose of this study is to examine the influence of earnings management during initial public offerings on the listing day returns.Design/methodology/approachThe study collected data for 511 Indian IPOs that came between April 2003 and March 2019 for calculating earnings management. On the basis of the Cross Sectional Modified Jones Model 1995, the paper presents three proxies of earnings management as discretionary accruals (DA), discretionary current accruals (DCA) and discretionary long-term accruals (DLA). The study further used correlation and multiple regression analysis to assess the impact of earnings management on listing day returns.FindingsThe findings show that earnings management and listing day returns vary through issue-year and industry-type. Apart from it, the study reveals a greater contribution of short-term accruals in earnings management on the basis of higher DCA values. It also discloses that the aggregate level of earnings management (DA) influences listing returns, whereas DCA and DLA separately have no impact on the listing day returns of the Indian IPOs.Research limitations/implicationsThe findings are useful to potential investors and analysts to observe, assess and understand the quality of financial reports that are based on fallacious disclosure of accounting figures. The study also reflects the efficacy of Indian regulatory norms for IPOs in constraining earnings management and underpricing, thus providing meaningful insight to the policy makers and the regulators.Originality/valueThis study is distinguished by its focus on determining the influence of earnings management on listing day returns in Indian IPOs by using three earnings management proxies.

Dubai will draw in investment through share offerings

Significance On the same day, its new USD450mn desalination project, publicised as the most sustainable in the region, was reported to be on track for completion. DEWA, the emirate’s principal provider of power and desalinated water, is seeking to attract investors as it gears up to launch the first in a run of new major initial public offerings (IPOs) in Dubai. Impacts The reliance of companies targeted for IPOs on service charges levied on Dubai’s majority-expatriate population may deter some investors. Dubai will showcase future deals to advertise its claim that it is still the most attractive investment location in the Gulf. The IPO push will be personally driven by Dubai’s deputy ruler, Maktoum bin Mohammed bin Rashid Al Maktoum.

Earnings management and issue characteristics: an empirical analysis of IPOs in India

Purpose This study aims to examine earnings management around initial public offerings (IPOs) in India. It also explores the influence of issue characteristics on earnings management around the IPOs. Design/methodology/approach A sample of 511 IPOs that came during April 2003-March 2019 is studied for calculating earnings management for pre-issue, issue and post-issue years. Using Cross-Sectional Modified Jones Model, the paper presents earnings management on the basis of three proxies i.e. discretionary accruals, discretionary current accruals and discretionary long-term accruals. The influence of issue characteristics on earnings management practised around the IPOs is also observed through correlation and multiple regression analysis. Findings The paper finds that earnings management is abnormally high during the issue year compared with pre-issue and post-issue years. It also unveils that profitability, premium, age, and size of the issuer significantly determine the level of pre-issue and issue year earnings management practised by Indian IPO issuers. Research limitations/implications The findings are useful to stakeholders (potential investors, analysts and regulators) to observe, assess and understand the quality of financial numbers that are based on fallacious disclosure of accounting figures. It provides insight into the possibilities of managed earnings around the issue that could influence investors’ decision-making. Further, the study reflects the efficacy of Indian regulatory norms for IPOs. Originality/value To the authors’ knowledge, it is the only Indian study that had used an extensive data set of about two decades to calculate earnings management during pre-issue, issue and post-issue years. The uniqueness of the study further lies in three proxies of earnings management representing short-term and long-term accruals. Moreover, it is the first study to observe the influence of IPO issue characteristics on earnings management.

effect of underwriter's reputation and auditor's reputation on underpricing in medium companies taking an initial public offering on the Indonesia stock exchange

The purpose of this study is to obtain empirical evidence of the influence of auditor reputation and the effect of underwriter reputation on medium-sized companies that conduct initial public offerings. This research was conducted on 190 companies experiencing underpricing listed on the Indonesia Stock Exchange (IDX) for the 2016-2021 period, the research data used in this study is secondary data. The number of samples analyzed was 130 development board companies and experienced underpricing because companies that met the sample criteria. The analytical technique used in this study was Multiple Linear Regression Analysis. The results of the study prove that underwriter reputation has a negative influence on underpricing of medium-sized companies that conduct initial public offerings. The reputation of the auditor has no effect on the underpricing of medium-sized companies that make this initial public offering on the IDX.

The EFFECT OF CORPORATE SOCIAL RESPONSIBILITY DISCLOSURE, CAPITAL INTENSITY, ROA AND INVENTORY INTENSITY ON TAX AGGRESSIVENESS (Study on Companies Conducting Initial Public Offerings 2015 – 2017)

Penelitian ini bertujuan untuk menguji pengaruh Pengungkapan Corporate Social Responsibility, Capital Intensity, ROA , dan Intensitas Persediaan terhadap pajak agresivitas perusahaan. Penelitian ini menggunakan alat analisis SPSS 24 Populasi dalam penelitian ini berjumlah 68 perusahaan yang melakukan Initial Public Offering yang terdaftar di Bursa Efek Indonesia (BEI) selama periode 2015-2017. Penentuan sampel penelitian menggunakan metode purposive sampling dan memperoleh sampel sebanyak 40 perusahaan yang melakukan Initial Public Offering berdasarkan kriteria tertentu. Hasil penelitian menunjukkan bahwa Pengungkapan Corporate Social Responsibility, Capital Intensity, ROA dan Intensitas Persediaan berpengaruh signifikan terhadap agresivitas pajak perusahaan. Keterbaruan penelitian ini yaitu menggunakan Sampel perusahaan IPO.

Are initial public offerings significant to firm performance in an emerging stock market? Evidence from China

urpose:This study investigates firm performance after going public and explores whether Initial Public Offerings (IPOs) contribute to it.Design/methodology/approach: This study employs comprehensive regression models to examine IPO significance to both operating performance and market performance.Findings/results: It suggests that IPO firms retain their growth over the first 3 years after going public, but the growth does not sustain after the third year in terms of profit-related indicators, which is distinguishing from prior research. IPOs may contribute to firms’ market performance only, they are insignificant to firms’ operating performance in general, whilst industry-adjusted evidence suggests that IPOs are negatively associated with operating performance in terms of return on assets, return on sales and debt to assets.Practical implications: The practical implication for managers is to spend more IPO capitals on business operations to maximise firm value.Originality/value: Market value is taken into account, whilst operating performance is considered only by prior research, and it presents some different findings from prior studies based on developed stock markets.

Allocation discretion, price discounts and returns in Turkish initial public offerings

Purpose This study aims to investigate whether underwriters exercise their allocation discretion to offer favorable discounts to institutional investors. Design/methodology/approach The research covers 173 offerings at Borsa Istanbul between 2010 and September 2021. Two hypotheses related to allocation discretion are developed and tested by means of probit, ordinary least squares and two-stage least squares regressions. Heckman selection regressions are used for robustness tests. Findings Allocation discretion is catered toward institutional investors who account for more than 56% of all initial allocations adjusted by gross proceeds. Close to 84% of all gross proceeds come from offerings that allocation discretion is exercised. These discretionary offerings are sold with larger price discounts, yet provide lower initial returns, while evidence points to reallocation to retail investors due to weak demand from institutional investors. Research limitations/implications Despite using the population of firms in the research period, the sample size is small relative to more developed markets. The research period cannot be extended because allocation discretion is allowed in 2010. Practical implications The research highlights the importance of institutional and foreign investors to the equity markets. This issue is relevant due to the ongoing flight of foreign investors from emerging economies and the increasing participation of small investors in the stock markets. Social implications The study cautions retail investors against greater (re)allocations by underwriters who may seek to compensate for the loss of their foreign investor base and urges policymakers to regain foreign investors. Originality/value To the best of the authors’ knowledge, this is the first research paper to use actual discounts disclosed in the prospectus to test the predictions related to allocation discretion. The study also contributes to the emerging markets literature by documenting allocation practices of the Turkish underwriters for the first time.

Impact of Firm Characteristics on IPO’s Short Run Performance: Evidence from Pakistan

In present day world, the concept of initial public offering (IPO's) has got much significance since its execution altogether influence the success of the companies. The current study aims at conducting a nonsystematic review of literatures on the concept of short runs performance of initial public offering in Pakistan. In this regard, we studied the IPO’s of 77 companies listed at Pakistan Stock Exchange (PSX) from the period of 2000-2015. The finding shows a positive and significance relationship between size of the firm and underwriter reputation while the age of the firm and risk shows negative relationship with the dependent variable MAAR. The performance of initial public offerings has significant effect on success or failure of a company. In this way, the companies in modern corporate world can ensure their success through effective utilization of initial public offerings.

Latent class analysis of IPOs in the Nordics

We examine how the offer size of initial public offerings (IPOs) and the market return on their issue date are related to the pricing of 314 IPOs issued by firms in Denmark, Finland, Norway and Sweden at the one-day, one-week and four-week horizons using latent class analysis, which is a structural equation methodology. We identify four latent classes at each time horizon, where classes (i)-(ii) include a greater number of IPOs: (i) large-sized and underpriced IPOs; (ii) small-sized and overpriced IPOs; (iii) small-sized and severely underpriced IPOs; and (iv) large-sized IPOs that are overpriced at the one-day horizon but underpriced at the four-week horizon. The market returns are normal in latent classes (i)-(iii) and weak in class (iv). Approximately half of the IPOs in the technology sector are in the latent class with small-sized and overpriced IPOs, and most of the IPOs in the class with small-sized and severely underpriced IPOs are in the healthcare sector. Finally, the underpricing of IPOs is not corrected after one or four weeks of trading. Instead, the mean return and the standard deviation of returns increase with the time horizon.