Article2003

Earnings management and initial public offerings: Evidence from the Netherlands

Peter Roosenboom · Tjalling van der Goot · Gerard Mertens

168 citations0/0 files storedThe International Journal of Accounting

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Auditing, Earnings Management, Governance Accounting and Organizational Management Corporate Governance and Financial Management

Abstract

This paper presents one of the first studies of earnings management by initial public offering (IPO) firms in a European country. Using a sample of 64 Dutch IPOs, we investigate the pattern of discretionary current accruals (DCA) over time. We find that managers manage their company's earnings in the first year as a public company but not in the years before the IPO. We also examine the impact of earnings management on the long-run stock price performance of IPOs. We find a negative relation between the size of the DCA in the first year as a public company and long-run stock price performance over the next 3 years. A number of additional tests support these findings.

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References

1991Earnings Management During Import Relief Investigations 1995Detecting Earnings Management.1999A Review of the Earnings Management Literature and Its Implications for Standard Setting n.d.A model of investor sentiment /2012Detecting Earnings Management 1991The Long‐Run Performance of initial Public Offerings 2000The effect of international institutional factors on properties of accounting earnings 1997Detecting long-run abnormal stock returns: The empirical power and specification of test statistics

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