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Assessing Earnings Quality At The Ipo
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Book Synopsis Assessing Earnings Quality at the IPO by : Melissa F. Lewis
Download or read book Assessing Earnings Quality at the IPO written by Melissa F. Lewis and published by . This book was released on 2007 with total page 73 pages. Available in PDF, EPUB and Kindle. Book excerpt: Investors in initial public offering (IPO) firms face a dilemma: Should they rely on earnings containing income-increasing accruals when valuing IPOs? On one hand, these accruals could reflect information about managers' expectations of future cash flows. On the other hand, managers could use the discretion inherent in current accounting standards to opportunistically inflate earnings in hopes of increasing the offer price. This paper explores the extent to which reputable investment banks help resolve uncertainty about the quality of IPO firms' income-increasing accruals and resulting earnings. Investment bankers have the experience, knowledge, and incentives to accurately assess the quality of IPO firms' earnings and correctly price earnings components. Accordingly, I predict and find that income-increasing accruals are of higher quality for firms whose managers employ a reputable investment bank than for firms whose managers employ a less reputable investment bank. Further, IPO market participants capitalize earnings and positive accruals at higher multiples when firms employ reputable investment banks. The higher multiples applied to the earnings and income-increasing accruals of firms with reputable investment banks do not appear to be "over-priced" as Fama and French factor regressions show no evidence of long-run underperformance for the sample as a whole, or subsets of the sample with reputable investment bank representation. Overall, my findings are consistent with a sophisticated market for IPO securities, and suggest that market participants, on average, recognize and price differential earnings quality at the IPO.
Book Synopsis Earnings Quality Evaluation with Special Reference to the Earnings Management of Egyptian IPOs by : Hany Mohamed Moustafa Kamel
Download or read book Earnings Quality Evaluation with Special Reference to the Earnings Management of Egyptian IPOs written by Hany Mohamed Moustafa Kamel and published by . This book was released on 2006 with total page 700 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis A Comparative Analysis of Real and Accrual Earnings Management Around Initial Public Offerings Under Different Regulatory Environments by : Mohammad Alhadab
Download or read book A Comparative Analysis of Real and Accrual Earnings Management Around Initial Public Offerings Under Different Regulatory Environments written by Mohammad Alhadab and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: While earnings management around IPOs has been researched in a number of settings, there has been a relative absence of work that analyses the impact of the regulatory environment on such activities. We find that the regulatory environment does impact the real and accrual earnings management activities of IPO firms. Our results show that IPO firms listing on the lightly regulated UK Alternative Investment Market (AIM) have higher (lower) levels of accrual based and sales based (discretionary expenses based) earnings management around the IPO than firms listing on the more heavily regulated Main market in the UK.
Book Synopsis Earnings Accruals and Real Activities Management around Initial Public Offerings by : Peter Ising
Download or read book Earnings Accruals and Real Activities Management around Initial Public Offerings written by Peter Ising and published by Springer Gabler. This book was released on 2014-04-30 with total page 240 pages. Available in PDF, EPUB and Kindle. Book excerpt: The beginning of the new millennium was characterized by company scandals in accounting around the world. A transparent and fair presentation of financial statements is beneficial for capital market participants. Especially around initial public offerings different incentives of these players exist to influence financial statements in diverse aspects. Therefore, studies of earnings management try to identify abnormal behavior. This thesis covers additional aspects to shed light on substantial drivers of discretionary reporting behavior around going public. Factors like influence on real activities, industry affiliation, and specific years in the IPO process add further insight to this theoretical and practical topic. The dependence on these factors is high and confirm that company specifics are important for interpretation of results.
Book Synopsis Earnings Quality by : Jennifer Francis
Download or read book Earnings Quality written by Jennifer Francis and published by Now Publishers Inc. This book was released on 2008 with total page 97 pages. Available in PDF, EPUB and Kindle. Book excerpt: This review lays out a research perspective on earnings quality. We provide an overview of alternative definitions and measures of earnings quality and a discussion of research design choices encountered in earnings quality research. Throughout, we focus on a capital markets setting, as opposed, for example, to a contracting or stewardship setting. Our reason for this choice stems from the view that the capital market uses of accounting information are fundamental, in the sense of providing a basis for other uses, such as stewardship. Because resource allocations are ex ante decisions while contracting/stewardship assessments are ex post evaluations of outcomes, evidence on whether, how and to what degree earnings quality influences capital market resource allocation decisions is fundamental to understanding why and how accounting matters to investors and others, including those charged with stewardship responsibilities. Demonstrating a link between earnings quality and, for example, the costs of equity and debt capital implies a basic economic role in capital allocation decisions for accounting information; this role has only recently been documented in the accounting literature. We focus on how the precision of financial information in capturing one or more underlying valuation-relevant constructs affects the assessment and use of that information by capital market participants. We emphasize that the choice of constructs to be measured is typically contextual. Our main focus is on the precision of earnings, which we view as a summary indicator of the overall quality of financial reporting. Our intent in discussing research that evaluates the capital market effects of earnings quality is both to stimulate further research in this area and to encourage research on related topics, including, for example, the role of earnings quality in contracting and stewardship.
Book Synopsis Line-Item Analysis of Earnings Quality by : Melumad Nahum
Download or read book Line-Item Analysis of Earnings Quality written by Melumad Nahum and published by Now Publishers Inc. This book was released on 2009 with total page 159 pages. Available in PDF, EPUB and Kindle. Book excerpt: Line-Item Analysis of Earnings Quality provides a comprehensive summary and analysis of the specific earnings quality issues pertaining to key line item components of the financial statements. After providing an overview of earnings quality and earnings management, Line-Item Analysis of Earnings Quality analyzes key line items from the financial statements. For each key line item, the authors: review accounting principles; discuss implications for earnings quality; evaluate the susceptibility of the item to manipulation; describe analyses and red flags which may inform on the item's quality. Line-Item Analysis of Earnings Quality will prove useful in conducting fundamental and contextual analyses through its analysis and evaluations.
Book Synopsis Earnings Management Around Financial Sponsor Backed Initial Public Offerings - Theoretical Discussion and Empirical Examination by :
Download or read book Earnings Management Around Financial Sponsor Backed Initial Public Offerings - Theoretical Discussion and Empirical Examination written by and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This study analyzes earnings management around financial sponsor backed initial public offerings. Using a sample of 185 private equity and 267 venture capital backed firms that went public on either the New York Stock Exchange (NYSE) or the National Association of Securities Dealers Automated Quotations (NASDAQ) in the ten years from 2004 to 2013, potential earnings manipulation is examined at three different points in time: the year before the offering, as well as the year of and the year immediately after it. The study finds mean statistically significant discretionary current accruals of 2.58% for private equity backed firms in the year of the offering, indicating positive earnings management in that year. However, taking also total discretionary accruals into account and combining the results with the ones obtained for venture capital backed firms, the provided evidence suggests that, contrary to initial beliefs, financial sponsor backed companies do report quite conservatively in the years around their initial public offering and do not aggressively inflate earnings. In addition, venture capital backed firms seem to report even more conservatively than their private equity backed counterparts. Investors are, however, advised to always subjectively assess earnings quality by looking at specific accounting based earnings management techniques before investing in such equity offerings.
Book Synopsis Earnings Forecasts Disclosure Regulation and Earnings Management by IPO Firms by : Bikki Jaggi
Download or read book Earnings Forecasts Disclosure Regulation and Earnings Management by IPO Firms written by Bikki Jaggi and published by . This book was released on 2019 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines whether a regulation on mandatory disclosure of earnings forecasts encourages managers to issue more optimistic earnings forecasts, and whether the optimistic forecasts are revised downward or the reported earnings are managed upward using discretionary accruals to reduce the forecast error. Additionally, it evaluates how investors react to earnings management and forecast revisions. The study is based on 760 forecasts issued by Taiwan IPO firms from 1991 to 2000 after the regulation to issue the earnings forecasts was imposed by the Taiwan Securities and Futures Exchange Commission (TSFEC) and it also uses a sample of 86 IPO firms prior to the issue of regulation. The results show that the IPO firms issue more optimistic forecasts than conservative forecasts. They adjust their reported earnings of optimistic forecasts upward with discretionary accruals more than revising the earnings forecasts downward, whereas they revise conservative forecasts upward more than adjusting the reported earnings downward. The results on the comparative analysis of earnings management by IPO firms before and after issuance of the TSFEC regulation provide additional support to the findings that earnings management by IPO firms increased significantly after the regulation was imposed. The results on investors' reaction to reported earnings show that investors reacted positively to higher reported earnings compared to the last revision of forecasts and they ignored the upward adjustment of reported earnings. Their reaction has been negative to downward revisions and positive to upward revisions.
Author :Patricia M. Dechow Publisher :Research Foundation of the Institute of Chartered Financial Analysts ISBN 13 :9780943205687 Total Pages :152 pages Book Rating :4.2/5 (56 download)
Book Synopsis Earnings Quality by : Patricia M. Dechow
Download or read book Earnings Quality written by Patricia M. Dechow and published by Research Foundation of the Institute of Chartered Financial Analysts. This book was released on 2004-01-01 with total page 152 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Nonprofessional Investors' Framework for Understanding Earnings Quality by : Reginald Wilson
Download or read book Nonprofessional Investors' Framework for Understanding Earnings Quality written by Reginald Wilson and published by . This book was released on 2016 with total page 11 pages. Available in PDF, EPUB and Kindle. Book excerpt: The central goal of this article is to provide nonprofessional investors with a deeper understanding of the impact of accrual accounting on earnings quality. Improving nonprofessional investors' understanding of earnings quality is essential to the capital market, as they have been found to own nearly one-third of all outstanding stock (Bogle 2005), a number which anecdotally has increased due to employer-directed compensation plans and online stock trading platforms. Following a presentation of the importance of accruals in the earnings process, the framework discusses various earnings management practices that nonprofessional investors should consider when evaluating earnings quality.
Book Synopsis Earnings Quality Evaluation with Special Reference to the Earning Management of Egyptian IPOs/Hany Mohamed Moustafa Kamel by : Hany Mohamed Moustafa Kamel
Download or read book Earnings Quality Evaluation with Special Reference to the Earning Management of Egyptian IPOs/Hany Mohamed Moustafa Kamel written by Hany Mohamed Moustafa Kamel and published by . This book was released on 2006 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Earnings Management and Ownership Retention for Initial Public Offering Firms by : Qintao Fan
Download or read book Earnings Management and Ownership Retention for Initial Public Offering Firms written by Qintao Fan and published by . This book was released on 2009 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates, both theoretically and empirically, how earnings management and ownership retention interact, and how these two jointly affect the equilibrium market valuation of IPO firms in the presence of information asymmetry. Analytically, this paper extends the univariate signaling framework of Leland and Pyle (1977) and derives an efficient signaling equilibrium in which both reported earnings and ownership retention are endogenously chosen to convey the IPO issuer's private information. It is shown that even though either ownership retention or reported earnings communicates the issuer's type to the market unambiguously, the issuer will strategically employ both signals to achieve separation from potential lower quality imitators at minimal cost. Comparative statics analysis shows that the trade-off between the two signals depends critically on the uncertainty over future earnings. The theoretical analysis generates several empirical implications regarding market efficiency, IPO pricing, and the strategic choice of earnings management. Through systematic econometric analysis, I confirm the major predictions of the model.
Book Synopsis Earnings Management by : Joshua Ronen
Download or read book Earnings Management written by Joshua Ronen and published by Springer Science & Business Media. This book was released on 2008-08-06 with total page 587 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book is a study of earnings management, aimed at scholars and professionals in accounting, finance, economics, and law. The authors address research questions including: Why are earnings so important that firms feel compelled to manipulate them? What set of circumstances will induce earnings management? How will the interaction among management, boards of directors, investors, employees, suppliers, customers and regulators affect earnings management? How to design empirical research addressing earnings management? What are the limitations and strengths of current empirical models?
Book Synopsis The Sharpest Tool in the Shed by : Tatiana Fedyk
Download or read book The Sharpest Tool in the Shed written by Tatiana Fedyk and published by . This book was released on 2017 with total page 63 pages. Available in PDF, EPUB and Kindle. Book excerpt: The valuation of STEM (Science, Technology, Engineering and Math) firms has gained attention in the literature over the past two decades. Research has shown that for valuation of STEM firms, accounting items such as sales growth and R&D expenditures are more important than bottom-line earnings. In this paper, we examine whether, around the time of the IPO, managers of STEM firms apply discretion over the same accounting items most weighted by investors for their valuation. We find that investors tend to weigh sales growth and R&D more heavily than earnings in determining market value of STEM firms and that managers respond by managing those items rather than bottom-line earnings. This is in contrast to findings in the literature of a bottom-line earnings management by IPO firms; wherein STEM firms are not examined separately. Further, we find that the negative association between abnormal accruals and future stock returns found in prior research is limited to non-STEM firms, whereas for STEM firms, stock returns are associated with sales management. Our results shed light on the differential behavior of STEM vs. non-STEM mangers and highlight the importance of a departure from the traditional IPO earnings management paradigm, which assumes that firms mainly manage their earnings.
Book Synopsis Damodaran on Valuation by : Aswath Damodaran
Download or read book Damodaran on Valuation written by Aswath Damodaran and published by John Wiley & Sons. This book was released on 2016-02-08 with total page 698 pages. Available in PDF, EPUB and Kindle. Book excerpt: "Aswath Damodaran is simply the best valuation teacher around. If you are interested in the theory or practice of valuation, you should have Damodaran on Valuation on your bookshelf. You can bet that I do." -- Michael J. Mauboussin, Chief Investment Strategist, Legg Mason Capital Management and author of More Than You Know: Finding Financial Wisdom in Unconventional Places In order to be a successful CEO, corporate strategist, or analyst, understanding the valuation process is a necessity. The second edition of Damodaran on Valuation stands out as the most reliable book for answering many of today?s critical valuation questions. Completely revised and updated, this edition is the ideal book on valuation for CEOs and corporate strategists. You'll gain an understanding of the vitality of today?s valuation models and develop the acumen needed for the most complex and subtle valuation scenarios you will face.
Book Synopsis The Venture Capital Cycle by : Paul Alan Gompers
Download or read book The Venture Capital Cycle written by Paul Alan Gompers and published by MIT Press. This book was released on 2004 with total page 592 pages. Available in PDF, EPUB and Kindle. Book excerpt: An analysis of the venture capital process, from fund-raising through investing to exiting investments; a new edition with major revisions and six new chapters that reflect the latest research.
Book Synopsis Capital Choices by : Michael E. Porter
Download or read book Capital Choices written by Michael E. Porter and published by . This book was released on 1994-12-01 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
