Real and Accrual Earnings Management Around IPOs: US Evidence
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Author(s)
Chung, Richard Yiu-Ming
Niu, Yanjun
Wei, Steven
Year published
2013
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This study examines the presence of real activities manipulation (REM) of IPO firms utilizing the cross-sectional regressions on each industry-year (Roychowdhury, 2006). The real activities examined in this paper include sales manipulation, reduction of discretionary expenses and overproduction. We show that IPO firms have significantly negative abnormal cash flows from operations and significantly positive abnormal production costs in the IPO year. The findings suggest that IPO firms not only manipulate accruals to inflate reported earnings, but also engage in real activities manipulation. We also show that IPO firms. ...
View more >This study examines the presence of real activities manipulation (REM) of IPO firms utilizing the cross-sectional regressions on each industry-year (Roychowdhury, 2006). The real activities examined in this paper include sales manipulation, reduction of discretionary expenses and overproduction. We show that IPO firms have significantly negative abnormal cash flows from operations and significantly positive abnormal production costs in the IPO year. The findings suggest that IPO firms not only manipulate accruals to inflate reported earnings, but also engage in real activities manipulation. We also show that IPO firms. decisions to manipulate earnings in the IPO year is positively related to the amounts of IPO proceeds and negatively related to the underwriters. reputation rankings and the presence of venture capital.
View less >
View more >This study examines the presence of real activities manipulation (REM) of IPO firms utilizing the cross-sectional regressions on each industry-year (Roychowdhury, 2006). The real activities examined in this paper include sales manipulation, reduction of discretionary expenses and overproduction. We show that IPO firms have significantly negative abnormal cash flows from operations and significantly positive abnormal production costs in the IPO year. The findings suggest that IPO firms not only manipulate accruals to inflate reported earnings, but also engage in real activities manipulation. We also show that IPO firms. decisions to manipulate earnings in the IPO year is positively related to the amounts of IPO proceeds and negatively related to the underwriters. reputation rankings and the presence of venture capital.
View less >
Journal Title
Corporate Ownership & Control
Volume
10
Issue
3
Copyright Statement
© 2013 VirtusInterpress. The attached file is reproduced here in accordance with the copyright policy of the publisher. Please refer to the journal's website for access to the definitive, published version.
Subject
Financial Accounting
Accounting, Auditing and Accountability
Banking, Finance and Investment
Business and Management