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Is Window-Dressing around Going Public Beneficial? Evidence from Poland

Department of Corporate Finance, Poznań University of Economics and Business, al. Niepodległości 10, 61-875 Poznań, Poland
Author to whom correspondence should be addressed.
J. Risk Financial Manag. 2019, 12(1), 18;
Received: 13 December 2018 / Revised: 8 January 2019 / Accepted: 18 January 2019 / Published: 21 January 2019
(This article belongs to the Special Issue Empirical Finance)
PDF [1269 KB, uploaded 21 January 2019]


The informativeness of financial reports has been of a great importance to both investors and academics. Earnings are crucial for evaluating future prospects and determining company value, especially around milestone events such as initial public offerings (IPO). If investors are misled by manipulated earnings, they could pay too high a price and suffer losses in the long-term when prices adjust to real value. We provide new evidence on the relationship between earnings management and the long-term performance of IPOs as we test the issue with a methodology that has not been applied so far for issues in Poland. We use a set of proxies of earnings management and test the long-term IPO performance under several factor models (CAPM, and three extensions of the Fama-French model). Aggressive IPOs perform very poorly later and earn severe negative stock returns up to three years after going public. The difference in returns in accrual quantiles is statistically significant in almost half of methodology settings. The results seem to suggest that investors might not be able to discount pre-IPO abnormal accruals and could be overoptimistic. Once the true earnings performance is revealed over time, the market makes downward price corrections. View Full-Text
Keywords: earnings management; earnings manipulation; earnings quality; initial public offering; IPO; asset pricing model earnings management; earnings manipulation; earnings quality; initial public offering; IPO; asset pricing model

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This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited (CC BY 4.0).
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Lizińska, J.; Czapiewski, L. Is Window-Dressing around Going Public Beneficial? Evidence from Poland. J. Risk Financial Manag. 2019, 12, 18.

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J. Risk Financial Manag. EISSN 1911-8074 Published by MDPI AG, Basel, Switzerland RSS E-Mail Table of Contents Alert
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