Accruals by going public firms

Abstract

This thesis studies the level of discretionary accruals of Thai IPO firms both prior and post-IPO years. It provides evidence that Thai IPO firms, on average, utilize higher discretionary accruals during pre-IPO than post-IPO years. The findings are robust with respect to alternative discretionary accruals measures. I also comprehensively examine discretionary accruals among various characteristics of IPO firms. I find earnings management in IPO firms either audited by Big 4 or non-Big 4 auditors. Besides, I find IPO firms utilize greater discretionary accruals during pre- than post-IPO years regardless of the level of difficulty in valuation of work in process. In addition, I find discretionary accruals are higher during pre-IPO than post-IPO years regardless of ownership retention, institutional investor involvement and firm size. The results indicate that only IPO firms that use fixed price offering to set the offer price utilize higher discretionary accruals during pre-IPO than post-IPO years. I find that IPO firms manipulate their earnings in both pre- and post-IPO years regardless of sales growth. This thesis also examines the association between underpricing and earnings management in pre-IPO years and I find the positive relation between underpricing and earnings management. I conclude that IPO firms utilize higher discretionary accruals during pre- than post-IPO years. The level of discretionary accruals is different among various characteristics of IPO firms.