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

El¿bieta Bukalska ORCID...a, Tomasz Sosnowskib, Anna Wawryszuk-Misztala
a Faculty of Economics, Maria Curie-Sk³odowska 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.

Keywords: Institutional investors, earnings management, initial public offering, IPO
JEL classification: G23, G32, M41

Received: April 3, 2022; Revised: July 21, 2022; Accepted: November 27, 2022; Prepublished online: June 27, 2025; Published: March 9, 2023  Show citation

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Bukalska, E., Sosnowski, T., & Wawryszuk-Misztal, A. (2023). Institutional Investors' Response to Earnings Management Before Initial Public Offering in Poland. Prague Economic Papers, 32(1), 45-60. doi: 10.18267/j.pep.819
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