Prague Economic Papers 2023, 32(1):45-60 | DOI: 10.18267/j.pep.819
Institutional Investors' Response to Earnings Management Before Initial Public Offering in Poland
- a Faculty of Economics, Maria Curie-Skłodowska University in Lublin, Poland
- b Faculty of Economics and Sociology, University of Lodz, Poland
The aim of the paper is to analyse the association between the use of accrual-based and real earnings management practices before the company goes public and the decision of institutional investors on buying or refraining from buying shares offered in initial public offering (IPO). The sample consists of 258 Polish new stock companies over the period 2005-2020. We find that such companies refrain from massive earnings management in the pre-IPO period: both real and accrual-based. However, we find evidence that the presence of institutional investors in the IPO is related to earnings inflation (selling, general and administrative expenses). Our study contributes to the debate on the role of institutional ownership in the IPO process in Central and Eastern Europe.
Klíčová slova: Institutional investors, earnings management, initial public offering, IPO
JEL classification: G23, G32, M41
Vloženo: 3. duben 2022; Revidováno: 21. červenec 2022; Přijato: 27. listopad 2022; Zveřejněno online: 27. červen 2025; Zveřejněno: 9. březen 2023 Zobrazit citaci
ACS | AIP | APA | ASA | Harvard | Chicago | Chicago Notes | IEEE | ISO690 | MLA | NLM | Turabian | Vancouver |
Reference
- Aggarwal, R., Prabhala, N. R., Puri, M. (2002). Institutional Allocation in Initial Public Offerings: Empirical Evidence. Journal of Finance, 57(3), 1421-1442, https://doi.org/10.1111/1540-6261.00465
Přejít k původnímu zdroji...
- Aggarwal, R., Saffi, P. A. C., Sturgess, J. (2015). The role of institutional investors in voting: Evidence from the securities lending market. Journal of Finance, 70(5), 2309-2346, https://doi.org/10.1111/jofi.12284
Přejít k původnímu zdroji...
- Aharony, J., Wang, J., Yuan, H. (2010). Tunneling as an incentive for earnings management during the IPO process in China. Journal of Accounting and Public Policy, 29(1), 1-26, https://doi.org/10.1016/j.jaccpubpol.2009.10.003
Přejít k původnímu zdroji...
- Ahmad-Zaluki, N. A., Campbell, K., Goodacre, A. (2011). Earnings management in Malaysian IPOs: the East Asian crisis, ownership control and post-IPO performance. International Journal of Accounting, 46(2), 111-137, https://doi.org/10.1016/j.intacc.2011.04.001
Přejít k původnímu zdroji...
- Anderson, C. W., Huang, J. (2017). Institutional investment in IPOs and post-IPO M&A activity. Journal of Empirical Finance, 41, 1-18, https://doi.org/10.1016/j.jempfin.2016.12.003
Přejít k původnímu zdroji...
- Armstrong, C. S., Foster, G., Taylor, D. J. (2016). Abnormal accruals in newly public companies: opportunistic misreporting or economic activity? Management Science, 62(5), 1316-1338, https://doi.org/10.1287/mnsc.2015.2179
Přejít k původnímu zdroji...
- Ball, R., Shivakumar, L. (2008). Earnings quality at initial public offerings. Journal of Accounting and Economics, 45(2-3), 324-349, https://doi.org/10.1016/j.jacceco.2007.12.001
Přejít k původnímu zdroji...
- Bebchuk, L. A., Cohen, A., Hirst, S. (2017). The Agency Problems of Institutional Investors. Journal of Economic Perspectives, 31(3), 89-102, https://doi.org/10.1257/jep.31.3.89
Přejít k původnímu zdroji...
- Chahine, S., Arthurs, J. D., Filatotchev, I., et al. (2012). The effects of venture capital syndicate diversity on earnings management and performance of IPOs in the US and UK: An institutional perspective, Journal of Corporate Finance, 18(1), 179-192, https://doi.org/10.1016/j.jcorpfin.2011.11.007
Přejít k původnímu zdroji...
- Chemmanur, T. J., Hu, G., Huang, J. (2010). The Role of Institutional Investors in Initial Public Offerings. The Review of Financial Studies, 23(12), 4496-4540, https://doi.org/10.1093/rfs/hhq109
Přejít k původnímu zdroji...
- Cogliati, G. M., Paleari, S., Vismara, S. (2011). IPO pricing: growth rates implied in offer prices. Annals of Finance, 7(1), 53-82, https://doi.org/10.1007/s10436-010-0170-6
Přejít k původnímu zdroji...
- Darrough, M., Rangan, S. (2005). Do Insiders Manipulate Earnings When They Sell Their Shares in an Initial Public Offering? Journal of Accounting Research, 43(1), 1-33, https://doi.org/10.1111/j.1475-679x.2004.00161.x
Přejít k původnímu zdroji...
- DuCharme, L. L., Malatesta, P. H., Sefcik, S. E. (2004). Earnings management, stock issues, and shareholder lawsuits. Journal of Financial Economics, 71(1), 27-49, https://doi.org/10.1016/s0304-405x(03)00182-x
Přejít k původnímu zdroji...
- Durana, P., Valášková, K., Siekelová, A., et al. (2022). Appraisal of earnings management across the sectors. Journal of Business Economics and Management, 23(2), 399-425, https://doi.org/10.3846/jbem.2022.16563
Přejít k původnímu zdroji...
- Eljelly, A. M. A. (2004). Liquidity-Profitability Tradeoff: An Empirical Investigation in an Emerging Market. International Journal of Commerce & Management, 14(2), 48-61, https://doi.org/10.1108/10569210480000179
Přejít k původnímu zdroji...
- Fernando, C. S., Krishnamurthy, S., Spindt, P. A. (2004). Are share price levels informative? Evidence from the ownership, pricing, turnover and performance of IPO firms. Journal of Financial Markets, 7(4), 377-403, https://doi.org/10.1016/j.finmar.2004.01.001
Přejít k původnímu zdroji...
- Ferreira, M. A., Matos, P. (2008). The colors of investors' money: The role of institutional investors around the world. Journal of Financial Economics, 88(3), 499-533, https://doi.org/10.1016/j.jfineco.2007.07.003
Přejít k původnímu zdroji...
- Field, L. C., Lowry, M. (2009). Institutional versus Individual Investment in IPOs: The Importance of Firm Fundamentals. Journal of Financial and Quantitative Analysis, 44(3), 489-516, https://doi.org/10.1017/s0022109009990032
Přejít k původnímu zdroji...
- Gao, S., Meng, Q., Chan, K. C., et al. (2017). Earnings management before IPOs: Are Institutional Investors Misled? Journal of Empirical Finance, 42, 90-108, https://doi.org/10.1016/j.jempfin.2017.02.003
Přejít k původnímu zdroji...
- Gompers, P. A., Metrick, A. (2001). Institutional Investors and Equity Prices. The Quarterly Journal of Economics, 116(1), 229-259, https://doi.org/10.1162/003355301556392
Přejít k původnímu zdroji...
- GPW (2021). Warsaw Stock Exchange Official Website. Główny Rynek GPW - Rynek Główny [online]. [Retrieved: 2021-06-09]. Available at: https://www.gpw.pl/analizy
- Guney, Y., Ozkan, A., Ozkan, N. (2007). International evidence on the non-linear impact of leverage on corporate cash holdings. Journal of Multinational Financial Management, 17(1), 45-60,
Přejít k původnímu zdroji...
- https://doi.org/10.1016/j.mulfin.2006.03.003
Přejít k původnímu zdroji...
- Haga, J., Höglund, H., Sundvik, D. (2018). Stock market listing status and Real Earnings Management. Journal of Accounting and Public Policy, 37(5), 420-435, https://doi.org/10.1016/j.jaccpubpol.2018.09.002
Přejít k původnímu zdroji...
- Han, S., Kang, T., Salter, S., et al. (2008). A cross-country study on the effects of national culture on Earnings Management. Journal of International Business Studies, 41(1), 123-141, https://doi.org/10.1057/jibs.2008.78
Přejít k původnímu zdroji...
- Hochberg, Y. V. (2012). Venture Capital and Corporate Governance in the Newly Public Firm. Review of Finance,16(2), 429-480, https://doi.org/10.1093/rof/rfr035
Přejít k původnímu zdroji...
- Hu, Z., Cai, W., Han, J., et al. (2012). An empirical study of the effect of venture capital participation on the accounting information quality of IPO firms. China Journal of Accounting Research, 5(3), 251-268, https://doi.org/10.1016/j.cjar.2012.08.004
Přejít k původnímu zdroji...
- Jenkinson, T., Jones, H. (2009). IPO Pricing and Allocation: A Survey of the Views of Institutional Investors. Review of Financial Studies, 22(4), 1477-1504, https://doi.org/10.1093/rfs/hhn079
Přejít k původnímu zdroji...
- Kalgo, S. H., Noordin, B. A. A., Nahar, H. S., et al. (2015). The Impact of Institutional Investors on Real and Accruals Earnings Management around IPO: Evidence from Malaysia Emerging Market. Capital Market Review, 23, 65-83.
- Kothari, S. P., Leone, A. J., Wasley, C. E. (2005). Performance matched discretionary accrual measures. Journal of Accounting and Economics, 39(1), 163-197, https://doi.org/10.1016/j.jacceco.2004.11.002
Přejít k původnímu zdroji...
- Lee, G., Masulis, R. W. (2011). Do more reputable financial institutions reduce earnings management by IPO issuers? Journal of Corporate Finance, 17(4), 982-1000, https://doi.org/10.1016/j.jcorpfin.2011.04.012
Přejít k původnímu zdroji...
- Lo, H.-Ch., Wu, R-S., Kweh, Q. L. (2017). Do institutional investors reinforce or reduce agency problems? Earnings management and the post-IPO performance. International Review of Financial Analysis, 52, 62-76, https://doi.org/10.1016/j.irfa.2017.04.004
Přejít k původnímu zdroji...
- Meluzín, T., Zinecker, M., Balcerzak, A. P., et al. (2018). The timing of initial public offerings - non-numerical model based on qualitative trends. Journal of Business Economics & Management, 19(1), 63-79, https://doi.org/10.3846/jbem.2018.1539
Přejít k původnímu zdroji...
- Michel, A., Oded, J., Shaked, I. (2020). Institutional investors and firm performance: Evidence from IPOs. North American Journal of Economics and Finance, 51, 101099, https://doi.org/10.1016/j.najef.2019.101099
Přejít k původnímu zdroji...
- Morsfield, S. G., Tan, C. E. L. (2006). Do Venture Capitalists Influence the Decision to Manage Earnings in Initial Public Offerings? The Accounting Review, 81(5), 1119-1150, https://doi.org/10.2308/accr.2006.81.5.1119
Přejít k původnímu zdroji...
- Nikbakht, E., Sarkar, S., Smith, G. C., et al. (2021). Pre-IPO earnings management: Evidence from India. Journal of International Accounting, Auditing and Taxation, 44, 100400, https://doi.org/10.1016/j.intaccaudtax.2021.100400
Přejít k původnímu zdroji...
- Neupane, S., Poshakwale, S. S. (2012). Transparency in IPO mechanism: Retail investors' participation, IPO pricing and returns. Journal of Banking & Finance, 36(7), 2064-2076, https://doi.org/10.1016/j.
Přejít k původnímu zdroji...
- jbankfin.2012.03.010
- Neupane, S., Paudyal, K., Thapa, C. (2014). Firm Quality or Market Sentiment: What Matters More for IPO Investors? Journal of Banking & Finance, 44, 207-218, https://doi.org/10.1016/j.jbankfin.2014.04.010
Přejít k původnímu zdroji...
- OECD (2011). The Role of Institutional Investors in Promoting Good Corporate Governance, Corporate Governance. Paris: OECD, https://doi.org/10.1787/9789264128750-en
Přejít k původnímu zdroji...
- Pan, J., Weng, R., Yin, S., et al. (M.) (2022). Central Supervision and Earnings Management: Quasi-experimental evidence from China. The British Accounting Review, 101082, https://doi.org/10.1016/j.bar.2022.101082
Přejít k původnímu zdroji...
- Premti, A., Smith, G. (2020). Earnings management in the pre-IPO process: Biases and predictors. Research in International Business and Finance, 52(C), 101120, https://doi.org/10.1016/j.ribaf.2019.101120
Přejít k původnímu zdroji...
- Ritter, J. R., Welch, I. (2002). A review of IPO activity, pricing and allocations. Journal of Finance, 57(4), 1795-1828, https://doi.org/10.1111/1540-6261.00478
Přejít k původnímu zdroji...
- Roychowdhury, S. (2006). Earnings management through real activities manipulation. Journal of Accounting and Economics, 42(3), 335-370, https://doi.org/10.1016/j.jacceco.2006.01.002
Přejít k původnímu zdroji...
- Sosnowski, T. (2017). Earnings Management in the Private Equity Divestment Process on Warsaw Stock Exchange. Equilibrium. Quarterly Journal of Economics and Economic Policy, 13(4), 689-705, https://doi.org/10.24136/eq.2018.033
Přejít k původnímu zdroji...
- Sosnowski, T. (2021). The credibility of earnings announced by new stock companies: accrual and real earnings management. Equilibrium. Quarterly Journal of Economics and Economic Policy, 16(3), 661-677, https://doi.org/10.24136/eq.2021.024
Přejít k původnímu zdroji...
- Teoh, S. H., Welch, I., Wong, T. (1998). Earnings Management and the Long-Run Market Performance of Initial Public Offerings. Journal of Finance, 53(6), 1935-1974, https://doi.org/10.1111/0022-1082.00079
Přejít k původnímu zdroji...
- Wooldridge, J. M. (2013). Introductory econometrics: A modern approach. 5th ed. Mason: Cengage Learning. ISBN 978-1-111-53104-1.
Tento článek je publikován v režimu tzv. otevřeného přístupu k vědeckým informacím (Open Access), který je distribuován pod licencí Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License (CC BY NC ND 4.0), která umožňuje nekomerční distribuci, reprodukci a změny, pokud je původní dílo řádně ocitováno. Není povolena distribuce, reprodukce nebo změna, která není v souladu s podmínkami této licence.