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

Joanna Lizińska , Leszek Czapiewski


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
Author Joanna Lizińska (WZ / KFP)
Joanna Lizińska,,
- Department of Corporate Finance
, Leszek Czapiewski (WZ / KFP)
Leszek Czapiewski,,
- Department of Corporate Finance
Journal seriesJournal of Risk and Financial Management, ISSN 1911-8074, (N/A 40 pkt)
Issue year2019
Publication size in sheets0.75
Keywords in Polishzarządzanie zyskami, manipulowanie zyskami, jakość wyników, pierwotne oferty publiczne, IPO, modele wyceny
Keywords in English earnings management; earnings manipulation; earnings quality; initial public offering; IPO; asset pricing model
Languageen angielski
Score (nominal)40
Score sourcejournalList
ScoreMinisterial score = 40.0, 09-04-2020, ArticleFromJournal
Publication indicators WoS Citations = 0
Citation count*1 (2020-10-19)
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* presented citation count is obtained through Internet information analysis and it is close to the number calculated by the Publish or Perish system.
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