Underwriter reputation, earnings management and the long-run performance of initial public offerings

Shao-Chi Chang, Tsai Yen Chung, Wen Chun Lin

Research output: Contribution to journalArticlepeer-review

26 Citations (Scopus)

Abstract

This study contributes to the extant literature on the nature of earnings management surrounding initial public offerings (IPOs) by investigating the role of underwriter reputation. We argue that prestigious underwriters will protect their reputation by carefully monitoring and certifying financial information on IPO firms, thereby limiting any potential earnings manipulation. As a result, those IPO firms that are associated with more prestigious underwriters are likely to exhibit substantially less-aggressive earnings management. Conversely, we find the existence of a negative relationship between earnings management and the post-offer performance of an IPO firm's stocks only for those firms associated with less-prestigious underwriters.

Original languageEnglish
Pages (from-to)53-78
Number of pages26
JournalAccounting and Finance
Volume50
Issue number1
DOIs
Publication statusPublished - 2010 Mar 1

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics, Econometrics and Finance (miscellaneous)

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