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Earnings Management and the Floatation Structure: Empirical Evidence from Polish IPOs

Author

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  • Tomasz Sosnowski

    (University of Lodz, Poland)

Abstract

Firms use discretionary accounting choices to manage earnings disclosures around the time of certain types of corporate events. The IPO provides an opportunity to earnings management because of the significant information asymmetry between investors and issuers at the time of the offering. The main aim of the study is to empirically investigate the links between the earnings management and the portions of primary and secondary shares sold in IPO. In order to investigate whether the earnings management influences the issue of new shares and the sale of secondary shares I use Tobit and logit regressions, where discretionary accruals are the proxy for earnings management. Using a sample of 221 firms from WSE between 2005 and 2015 I do not find evidence that the increase of pre-IPO discretionary accruals positively affects the sale of primary shares in the IPO, but the analysis revealed that the reporting less limits the probability of the new shares issuance. In turn, the sale of secondary shares in the IPO is more likely in companies using a conservative earnings management. Furthermore, negative discretionary accruals increase the portion of secondary shares in the IPO.

Suggested Citation

  • Tomasz Sosnowski, 2017. "Earnings Management and the Floatation Structure: Empirical Evidence from Polish IPOs," Working Papers 119/2017, Institute of Economic Research, revised May 2017.
    • Handle: RePEc:pes:wpaper:2017:no119
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    Cited by:

    1. Pavol Durana & Lucia Michalkova & Andrej Privara & Josef Marousek & Milos Tumpach, 2021. "Does the life cycle affect earnings management and bankruptcy?," Oeconomia Copernicana, Institute of Economic Research, vol. 12(2), pages 425-461, June.
    2. Skalická Martina & Zinecker Marek & Pietrzak Michał B. & Meluzín Tomáš & Dohnal Mirko, 2019. "Financial impact analysis of going public at the Warsaw Stock Exchange: Using Fuzzy Set Theory to understand behaviours of mature companies," Management & Marketing, Sciendo, vol. 14(1), pages 59-79, March.

    More about this item

    Keywords

    Initial public offering; IPO; Primary shares; Secondary shares; Earnings management;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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