A Study of Earnings Management and Stock Return of Initial Public Offerings

• Main Authors: Yun Fan Hsu, 許勻凡
• Other Authors: C. H. Chan
• Format: Others
• Published: 2013
• Online Access: http://ndltd.ncl.edu.tw/handle/09383290502334560180

碩士 === 長庚大學 === 工商管理學系 === 101 === The study is to examine whether initial public offering firms have management of earnings or not and if earnings management can be a factor to explain their long-run underperformance. The study used discretionary current accruals to measure the level of earnings management. It also used cumulative abnormal return, cross-sectional regression and Fama-French time-series regression to examine the relationship between the earnings management and long-term stock return of IPO firms. In addition, the study divided the samples into two categories: industry and period, to compare the difference between industry and period. The empirical results showed that IPO firm’s net income has gliding trend year by year after they go public. It can show that aggressive IPO firms with earnings management have lower long-term stock return than conservative IPO firms; the higher earnings management they have, the poorer long-term stock return will be. In addition, by the study, we found that if their industry or period is dissimilar, the relation between earnings management and long-run performance are different. Compared to traditional industry, the high-tech industry has strongly negative relationship between earnings management and long-term stock return. If we separate the traditional industry from two periods, the later period’s earnings management can be a better explanation to long-run underperformance than early period.