Discretionary current accruals of Chinese initial public offering (IPO) firms decreased after the abolition of fixed-price offering systems that directly linked offering price to reported earnings. Results suggest IPO firms that decrease managerial ownership manage earnings upward during the fixed-price offering period, but this relationship disappeared after the introduction of a book-building system. We also find that bank debt is negatively related to discretionary current accruals during the fixed-price offering period, but no relation exists for the book-building period. Leverage has a significant positive relationship with earnings management. However, this finding is potentially attributable to nonoffering price objectives or endogeneity biases.
- Bank loan
- Earnings management
- Fixed-price offering system
- Initial public offerings process
ASJC Scopus subject areas
- Economics, Econometrics and Finance (miscellaneous)