Author: Ke ZhangPublisher:
ISBN:
Category :
Languages : en
Pages : 55
Book Description
The Accuracy of Management Earnings Forecast in IPO Prospectuses (Malaysia).
Author: Ke ZhangEarnings Management and Forecast Accuracy
Author: Norashikin IsmailPublisher:
ISBN:
Category :
Languages : en
Pages : 0
Book Description
This thesis explores the link between earnings management and forecast accuracy in the context of Malaysian IPO's following a revision of the regulation on earnings forecast disclosure made in 1996. The study involves three different stages. The first stage examines the accuracy of earnings forecasts contained in the IPO prospectuses of Malaysian companies seeking listing from 1996 to December 2002. The second stage of study provides evidence of positive discretionary accrual in financial statements of IPO issuers in the year of IPO, and in the 3 year period following the IPO. Finally, a correlation study examines the link between earnings management and forecast error and other variables representing unexpected change in economic condition and company specific characteristics. The results from the first stage of study indicate that Malaysian IPO companies on average have a negative forecast error, indicating positive bias in their forecast. Multivariate results indicate that regulation of earnings forecast disclosure has no significant impact on accuracy but that economic condition, management optimism, and auditor reputation have. The second stage, studying earnings management on a sample of IPO 1996,1998 and 2000 regulated companies, provides evidence consistent with the prediction that managers of Malaysian IPO companies manage earnings upwards in the year of forecast issuance, or in the year the company make their forecasts. The study also provides evidence that managers continue to manage earnings during the period after listing, so long as there is continuing regulatory scrutiny. The findings of the final stage of study provide evidence of a significant association between earnings management and the relative size and direction of forecast error, after controlling for other expected associations. The regression results reveal that earnings management of Malaysian IPO companies is associated with forecast error, the changes in economic condition represented by a recovery and crisis period, company age and management ownership. The study makes a contribution in terms of understanding the nature of earnings management at the time of an IPO and in particular providing empirical evidence on the link between the forecast error and the extent of earnings management. The result shows that managers appear to manage earnings upwards significantly during the economic crisis and recovery period in order to match or come closer to the forecast made in the prospectus. In a highly concentrated ownership, the actions of IPO managers appear to be contrary to the assumption of agency theory. It is speculated that managers of IPO companies are managing their earnings upwards and reporting towards meeting their forecasts in order to manage their legitimacy and to establish their company's good reputation. This is because, as newly listed companies, they are under close market scrutiny and are under great pressure to meet the projections made to investors.
Corporate Governance and Earnings Forecasts Accuracy
Author: Nurwati A. Ahmad-ZalukiPublisher:
ISBN:
Category :
Languages : en
Pages :
Book Description
This paper aims to extend the research on the Malaysian IPO management earnings forecasts by examining the impact of corporate governance mechanisms and earnings forecasts accuracy. It seeks to investigate whether effective corporate governance is a credible signal of improving the quality of financial information. A sample of 235 IPO companies that went public during the period 1999-2006 was used. Absolute forecast error was used to proxy for earnings forecast accuracy and to represent financial disclosure quality. Companies with a higher percentage of non-executive directors in the audit committees and larger audit committee size exhibit greater forecast accuracy. The accuracy of IPO earnings forecast is also positively influenced by the use of brand-name auditor. The results suggest that effective corporate governance is a credible signal of improving the quality of financial information. The role of audit committee as financial monitors as suggested by the agency theory supports this study. The results are consistent with the belief that effective corporate governance is associated with higher financial disclosure quality. The results also support the decisions made by Malaysian regulators such as the Securities Commission to enhance the quality of financial disclosure by revising the Malaysian Code on Corporate Governance to encourage public companies to implement good governance practices such as audit committee independence.
The Impact of Disclosure Regulation on the Accuracy of Management Earnings Forecasts of Malaysian IPOs
Author: Mohammed Abdullah AmmerRegulatory Profit Targets and Earnings Management in Initial Public Offerings
Author: Ismail NorashikinPublisher:
ISBN:
Category :
Languages : en
Pages :
Book Description
We examine the extent of earnings management associated with meeting forecasts made in IPO prospectuses in a developing economy where government regulation requires a profit forecast but allow promoters to choose either (1) to provide a profit guarantee or (2) to elect for a moratorium on share transfers for a defined period. Since the manager is mandated to make earnings forecast and there are costs associated with forecast error, we hypothesise that, in the first reporting period following the IPO, managers opting for a profit guarantee will signal their ability to produce a result within the target zone while managers opting for a share moratorium will match that performance to maintain their reputation, with the result that both groups are indistinguishable in the magnitude of earnings management.Using a sample of 92 regulated IPO firms we find a strong negative association between forecast error before earnings management and a firm's discretionary accruals. Our results support the hypotheses, leading to the conclusion that earnings are managed towards the forecast amount, consistent with both the desire not to deviate excessively from the forecast and income smoothing.
Management Earnings Forecasts in IPO Prospectuses
Author: Yijun TuAccuracy of Earnings Forecasts Disclosed in IPO Prospectuses
Author: Bingdong XuThe Determinants of the Accuracy of Earnings Forecasts in IPO Prospectuses and Their Association with Initial IPO Returns: a Study of Greece
Author: Eirini SpanoudakiForecasts in IPO Prospectuses
Author: Denis CormierPublisher:
ISBN:
Category :
Languages : en
Pages : 0
Book Description
Prior research suggests that managers may use earnings management to meet voluntary earnings forecasts. We document the extent of earnings management undertaken within Canadian Initial Public Offerings (IPOs) and study the extent to which companies with better corporate governance systems are less likely to use earnings management to achieve their earnings forecasts. In addition, we test other factors that differentiate forecasting from non-forecasting firms, and assess the impact of forecasting and corporate governance on future cash flow prediction. We find that firms with better corporate governance are more likely to include a voluntary earnings forecast in their IPO prospectus. In addition, we find that corporate governance factors have an impact on the use of accruals management to meet forecasts, and on the predictive value of discretionary accruals.
Voluntary Disclosure of Management Earnings Forecasts in IPO Prospectuses
Author: Bruce J. McConomyPublisher:
ISBN:
Category :
Languages : en
Pages :
Book Description
Asymmetric information and mechanisms for its resolution in the initial public offering (IPO) process are subjects of extensive research and debate. In this paper, we investigate the impact of one such mechanism, namely voluntary disclosure of management earnings forecasts by issuers of IPOs, as a means of reducing asymmetric information as well as ex ante uncertainty. Our focus is on the relative importance of this voluntary disclosure mechanism on both IPO underpricing and post-issue return performance. Our results indicate that management earnings forecasts provide important and incremental information compared to other means of reducing asymmetric information, and these disclosures appear to improve the environment of IPO issuance. For example, our underpricing results show that firms that choose to provide forecasts leave quot;less money on the tablequot; with a lower degree of underpricing. In terms of post-issue performance, firms whose forecasts turn out to be optimistic are penalized significantly relative to other forecasters and non-forecasters.