Accounting Scandals in IPO Firms: Do Underwriters and VCs Help?

Agrawal, Anup; Cooper, Tommy

doi:10.1111/j.1530-9134.2010.00279.x

Accounting Scandals in IPO Firms: Do Underwriters and VCs Help?

Journal of Economics & Management Strategy, Vol. 19, No. 4, pp. 1117-1181, 2010

65 Pages Posted: 10 Jan 2011

See all articles by Anup Agrawal

Anup Agrawal

University of Alabama - Culverhouse College of Commerce & Business Administration

Tommy Cooper

University of Alabama - Department of Economics, Finance and Legal Studies

There are 3 versions of this paper

Abstract

We examine whether underwriter reputation, venture capitalist (VC) backing, and VC reputation are related to the probability that a newly public firm has serious accounting problems. Using a novel data set, we find that the probability of restatement by an initial public offering (IPO) firm is positively related to underwriter reputation and negatively related to VC backing, VC reputation, and VC maturity. Our results do not appear to be driven by the endogeneity of underwriter reputation or VC backing. Our findings suggest that while VCs positively influence the financial reporting quality of IPO firms, underwriters concerns about revenue generation outweigh their concerns about reputation.

Suggested Citation: Suggested Citation

Agrawal, Anup and Cooper, Tommy, Accounting Scandals in IPO Firms: Do Underwriters and VCs Help?. Journal of Economics & Management Strategy, Vol. 19, No. 4, pp. 1117-1181, 2010, Available at SSRN: https://ssrn.com/abstract=1733744 or http://dx.doi.org/10.1111/j.1530-9134.2010.00279.x