Earnings Management in Malaysian IPOs: The East Asian Crisis, Ownership Control and Post-IPO Performance

46 Pages Posted: 14 Feb 2007 Last revised: 12 Jan 2009

See all articles by Nurwati A. Ahmad-Zaluki

Nurwati A. Ahmad-Zaluki

Universiti Utara Malaysia - Othman Yeop Abdullah Graduate School of Business

Kevin Campbell

University of Stirling - Stirling Management School

Alan Goodacre

University of Stirling - Department of Accounting and Finance

Date Written: January 1, 2009

Abstract

The paper provides general evidence of income-increasing earnings management in Malaysian IPOs but this occurs primarily during a period of severe economic stress (the East Asian crisis). The requirement to provide a profit guarantee appears to reduce rather than encourage earnings management. Within this high ownership concentration market, ownership concerns also appear to constrain IPO earnings management. Owners are willing to forego 'opportunistic' earnings management and signalling opportunities to increase their likelihood of retaining control of the company post-IPO. IPO companies engaging in aggressive earnings management have significantly worse market-based performance than their more conservative counterparts, but only during the economic crisis period.

Keywords: initial public offerings, earnings management, ownership structure, long run stock market performance

JEL Classification: G32

Suggested Citation

Ahmad-Zaluki, Nurwati A. and Campbell, Kevin and Goodacre, Alan, Earnings Management in Malaysian IPOs: The East Asian Crisis, Ownership Control and Post-IPO Performance (January 1, 2009). Available at SSRN: https://ssrn.com/abstract=963085 or http://dx.doi.org/10.2139/ssrn.963085

Nurwati A. Ahmad-Zaluki (Contact Author)

Universiti Utara Malaysia - Othman Yeop Abdullah Graduate School of Business ( email )

Universiti Utara Malaysia
Sintok, Kedah 06010
Malaysia

Kevin Campbell

University of Stirling - Stirling Management School ( email )

Stirling Management School
Division of Accounting and Finance
Stirling, Scotland FK9 4LA
United Kingdom
(44) 1786 467280 (Phone)
(44) 1786 467308 (Fax)

Alan Goodacre

University of Stirling - Department of Accounting and Finance ( email )

Stirling, FK9 4LA
United Kingdom
+44 1786 467291 (Phone)
+44 1786 467308 (Fax)

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