Regulations, earnings management, and post-IPO performance: the Chinese evidence

Kao, Jennifer L., Wu, Donghui and Yang, Zhifeng 2009, Regulations, earnings management, and post-IPO performance: the Chinese evidence, Journal of banking and finance, vol. 33, no. 1, pp. 63-76, doi: 10.1016/j.jbankfin.2007.03.016.

Attached Files
Name Description MIMEType Size Downloads

Title Regulations, earnings management, and post-IPO performance: the Chinese evidence
Author(s) Kao, Jennifer L.
Wu, Donghui
Yang, ZhifengORCID iD for Yang, Zhifeng
Journal name Journal of banking and finance
Volume number 33
Issue number 1
Start page 63
End page 76
Total pages 14
Publisher Elsevier
Place of publication Amsterdam, The Netherlands
Publication date 2009-01
ISSN 0378-4266
Keyword(s) initial public offerings
earnings management
Summary In this study, we examine whether government regulatory initiatives in China involving IPO by SOEs may have contributed to opportunistic behaviors by the issuer. We focus on two sets of IPO regulations issued between January 1, 1996 and February 11, 1999: pricing regulations, which stipulate that IPO prices be a function of accounting performance, and penalty regulations, which penalize IPO firms for overly optimistic forecasts. We find that IPO firms that report better pricing-period accounting performance have larger declines in post-IPO profitability, lower first-day stock returns and worse long-run post-IPO stock performance. Furthermore, IPO firms that make overoptimistic forecasts also have lower first-day returns and worse post-IPO stock performance. Using non-core earnings as the proxy for earnings management, we document some evidence that IPO firms that report higher pricing-period accounting performance have engaged in more income-increasing earnings management. Hence, pricing regulations may have induced IPO firms to inflate pricing-period earnings and affect the post-IPO performance negatively. On the other hand, penalty regulations have deterred IPO firms from making overoptimistic earnings forecast and therefore have a positive impact on the behavior of IPO firms.
Notes Originally presented at the International Conference Celebrating the 30th Anniversary of the Journal of Banking and Finance
Language eng
DOI 10.1016/j.jbankfin.2007.03.016
Field of Research 150103 Financial Accounting
0102 Applied Mathematics
1502 Banking, Finance And Investment
Socio Economic Objective 910499 Management and Productivity not elsewhere classified
HERDC Research category C1.1 Refereed article in a scholarly journal
ERA Research output type C Journal article
Copyright notice ©2007, Elsevier
Persistent URL

Document type: Journal Article
Collections: Faculty of Business and Law
Department of Accounting
Connect to link resolver
Unless expressly stated otherwise, the copyright for items in DRO is owned by the author, with all rights reserved.

Version Filter Type
Citation counts: TR Web of Science Citation Count  Cited 75 times in TR Web of Science
Scopus Citation Count Cited 80 times in Scopus
Google Scholar Search Google Scholar
Access Statistics: 216 Abstract Views, 1 File Downloads  -  Detailed Statistics
Created: Mon, 30 Jan 2017, 14:10:00 EST

Every reasonable effort has been made to ensure that permission has been obtained for items included in DRO. If you believe that your rights have been infringed by this repository, please contact