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Earnings Management and the Long-Run Performance of Spanish Initial Public Offerings

37 Pages Posted: 7 Feb 2006  

Maria J. Pastor-Llorca

University of Alicante

Francisco Poveda

University of Alicante - Accounting and Finance Department

Date Written: February 2005

Abstract

The poor stock price performance of firms conducting initial public offerings is one of the recent puzzles in financial literature. We detect this market anomaly for Spanish IPO firms and we investigate whether earnings management around the time of the offering can explain these results. Consistent with this explanation, we notice that issuing firms make use of discretionary accruals to report higher earnings in the IPO year. Moreover, firms with higher level of discretionary accruals experience more negative long-run abnormal returns. Thus, this evidence suggests that opportunistic earnings management explains, at least partially, the IPO anomaly in Spain.

Keywords: Corporate Finance, Initial Public Offerings, Earnings Management, Accounting Accruals.

JEL Classification: G14, G24, G32, M41, M43, M47

Suggested Citation

Pastor-Llorca, Maria J. and Poveda, Francisco, Earnings Management and the Long-Run Performance of Spanish Initial Public Offerings (February 2005). Available at SSRN: https://ssrn.com/abstract=880766 or http://dx.doi.org/10.2139/ssrn.880766

Maria J. Pastor-Llorca (Contact Author)

University of Alicante ( email )

Campus de San Vicente
Carretera San Vicente del Raspeig
San Vicente del Raspeig, 03690
Spain

Francisco Poveda

University of Alicante - Accounting and Finance Department ( email )

Carretera de San Vicente s/n
03690 San Vicente del Raspeig, Alicante
Spain

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