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

By Nurwati A. Ahmad-Zaluki, Kevin Campbell, A. Goodacre. 2011

199 citations recorded by the source corpus.

We find evidence of income-increasing earnings management in Malaysian IPOs, which occurs primarily for IPOs during a period of severe economic stress (the East Asian crisis). Within the high-ownership-concentration Malaysian market, post-IPO control concerns also appear to constrain IPO earnings management: owners seem willing to accept reduced IPO proceeds and signaling opportunities to increase the likelihood of retaining control of the company post-IPO. The requirement to provide a profit guarantee does not seem to greatly affect earnings management. IPO companies engaging in aggressive income-increasing earnings management have significantly worse market-based performance than their more conservative counterparts, but again only for IPOs issued during the economic crisis period. Overall, the results suggest that personal liquidity concerns are an important factor in IPO decisions during the economic crisis.

Subfields: Accounting, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/4ea1e1a11af28ee84293d55968f069995eaef018

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Citations in the corpus

Financial Crisis And Earnings Management: The European Evidence (2014, background): “First, in such periods, most firms probably exhibit lower earnings, which should motivate managers to engage in income-increasing earnings management to compensate for the decrease of operational performance (Ahmad-Zaluki et al., 2011).”
Corporate Governance and Firm-Specific Stock Price Crashes (2016, unknown): “…had limited opportunities and fewer incentives to stockpile negative information through earning management practices [Jenkins et al. (2009); Ahmad-Zaluki et al. (2011); Chia et al. (2007); Filip and Raffournier (2014); Bertomeu and Magee (2011)], a precursor situation to stock price…”
Real and accrual earnings management and IPO failure risk (2015, background): “…(Aharony et al. 1993, Friedlan 1994, Rangan 1998, Teoh et al. 1998a, 1998b, DuCharme et al. 2001, Elder and Zhou 2002, Roosenboom et al. 2003, Gramlich and Sorensen 2004, Chen et al. 2005, Morsfield and Tan 2006, Chang et al. 2010, Ahmad-Zaluki et al. 2011, Lee and Masulis, 2011, Wongsunwai 2012).”