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    Earnings Management, IPO Underpricing, and Post-issue Stock Performance of Chinese SMEs

    Access Status
    Fulltext not available
    Authors
    Gao, J.
    Cong, L.
    Evans, John
    Date
    2015
    Type
    Journal Article
    
    Metadata
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    Citation
    Gao, J. and Cong, L. and Evans, J. 2015. Earnings Management, IPO Underpricing, and Post-issue Stock Performance of Chinese SMEs. Chinese Economy Journal. 48 (5): pp. 351-371.
    Source Title
    Chinese Economy Journal
    DOI
    10.1080/10971475.2015.1067085
    ISSN
    15580954
    School
    School of Accounting
    URI
    http://hdl.handle.net/20.500.11937/39519
    Collection
    • Curtin Research Publications
    Abstract

    This article empirically examines the association between earnings management and initial public offering (IPO) performance (underpricing and post-issue stock performance) of Chinese small and medium enterprises (SMEs). The analysis is based on a sample of 464 IPOs listed on the Shenzhen Stock Exchange (SZSE) SME board during 2006–2010. Consistent with our expectations, this article finds that a higher level of total discretionary accruals prior to the IPO is associated with a higher level of underpricing and poorer long-term stock performance. However, when total discretionary accruals are decomposed into current and long-term accruals, the associations are insignificant. The results are robust with respect to several alternative measures of earnings management and stock performance. Statistics also show, on average, Chinese SMEs have positive 3-year long-term stock returns relative to various benchmarks, and only firms with income-increasing accruals suffer long-term underperformance. Findings from this article add important new evidence to the literature as Chinese SME IPOs tend to perform differently compared with main board firms, likely because of their unique features.

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