Earning Management, Timing Ability and Long-Run Underperformance of IPOs in Bangladesh.

Abstract

This paper mainly focuses on two conjectures. Firstly the firm’s timing ability and secondly whether the firms are intentionally managing their pre-IPO discretionary accruals to overstate their earnings at the time of floatation to fetch higher price for their issues. In our study we do not find any evidence that supports the timing ability proposition of Ritter. But considering the cumulative abnormal return we find that in the long-run, IPOs have poor stock return when managers aggressively manage pre-IPO discretionary accruals of these firms than when they manage pre-IPO discretionary accruals conservatively.

Keywords: Earning management, long-run underperformance, timing ability.