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Earnings management in Malaysian IPOs: the East Asian crisis, ownership control and post-IPO performance

Citation
Ahmad-Zaluki NA, Campbell K & Goodacre A (2011) Earnings management in Malaysian IPOs: the East Asian crisis, ownership control and post-IPO performance, International Journal of Accounting, 46 (2), pp. 111-137.

Abstract
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.

Keywords
Initial public offerings; Earnings management; Ownership structure; Long-run stock market performance; JEL classification G32

StatusPublished
AuthorsAhmad-Zaluki Nurwati A, Campbell Kevin, Goodacre Alan
Publication date04/05/2011
Publication date online04/05/2011
Date accepted by journal04/05/2011
PublisherElsevier
ISSN 0020-7063
LanguageEnglish

Journal
International Journal of Accounting: Volume 46, Issue 2

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