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

Lizińska, Joanna; Czapiewski, Leszek

doi:10.3390/jrfm12010018

Cited by 8 publications

(5 citation statements)

References 62 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…The focus tends to be on discretionary accruals (Miloud, 2013). These concerns are particularly justified in the context of the ample evidence regarding the use of window dressing (Lizińska & Czapiewski, 2019).…”

Section: Literature Reviewmentioning

confidence: 99%

Persistence of pre-IPO earnings of new companies from CEE stock markets

Sosnowski

2022

View full text Add to dashboard Cite

Research background: A company?s earnings are one of the main determinants of investment decisions on the stock market. Thus, the reliability of disclosed financial information is crucial for the efficient allocation of capital. Unfortunately, reported earnings are an economic category susceptible to manipulation. This problem grows especially in the case of an initial public offering (IPO), as there is significant information asymmetry. Purpose of the article: The main aim of the paper is to assess the persistence of earnings reported by companies in the IPO process and to empirically identify financial characteristics associated with persistence of earnings. The usefulness of financial information is directly related to the issue of earnings quality. Therefore, this paper contributes to the stream of study on the quality of financial reporting of new stock companies. Methods: I employ a simple single-factor regression model to recognize the earnings persistence in new stock companies. Pre-IPO earnings are the explanatory variable. Then, I use multiple regression analysis to identify factors that influence this metric of reported earnings quality. Findings & value added: Using a sample of companies from stock exchange markets in Central and Eastern Europe (i.e., the Warsaw Stock Exchange, the Bulgarian Stock Exchange, the Bucharest Stock Exchange, the Belgrade Stock Exchange, the Prague Stock Exchange) that went public between 2010 and 2018, I find that, generally, pre-IPO earnings hold higher persistence compared to earnings reported in the year of the IPO. Profitability seems to be a factor that significantly influences this feature. Thus, the results contribute to corporate theory and practice facing insufficient empirical evidence on the issue of sustaining pre-IPO profitability in the long term, additionally putting these concerns in the context of the economic environment of European emerging stock markets.

show abstract

Section: Literature Reviewmentioning

confidence: 99%

Persistence of pre-IPO earnings of new companies from CEE stock markets

Sosnowski

2022

View full text Add to dashboard Cite

show abstract

“…The research on reporting quality for Polish companies does not cover the pandemic period. It has focused on selected industries in previous periods [Comporek, 2018], SMEs [Wójtowicz, 2015], and on income smoothing [Piosik, 2016], or was connected with equity offerings [Lizińska, Czapiewski, 2019]. The existing literature on earnings management for companies in Poland has not discussed the problem of aggressive accounting activities during market downturns, including the COVID-19 period.…”

Section: Iatridis and Dimitrasmentioning

confidence: 99%

Earnings Management amid the COVID-19 Financial Crisis: The Experience of Poland

Lizińska¹,

Czapiewski²

2023

GNPJE

Self Cite

View full text Add to dashboard Cite

Niniejsze badanie dotyczy oceny konsekwencji zawirowań na rynku wywołanych pandemią COVID-19 dla informacyjności sprawozdawczości finansowej. Jakość zysków została oszacowana za pomocą modeli przekrojowych, umożliwiających ocenę dyskrecjonalnych korekt memoriałowych, dyskrecjonalnych operacyjnych przepływów pieniężnych, dyskrecjonalnych kosztów uznaniowych i dyskrecjonalnych kosztów produkcji. Na podstawie danych dotyczących niefinansowych spółek publicznych w Polsce wykazano ewolucję zarządzania zyskiem typu memoriałowego oraz poprzez rzeczywiste transakcje w czasie kryzysu finansowego, co istotnie poszerza dotychczasowy stan wiedzy w tej dziedzinie. W szczególności w czasie kryzysu istotny był spadek korekt memoriałowych. Można to interpretować jako osłabienie skłonności do zawyżania zysków poprzez ingerencję w proces raportowania finansowego. Spółki wydawały się również bardziej skłonne do przyjęcia strategii big bath, aby zwiększyć swoje możliwości zawyżania dochodów w przyszłości. Ponadto badania potwierdziły, że na znaczeniu zyskało zarządzanie zyskami poprzez oddziaływanie na transakcje. Sugeruje to, że w czasie kryzysu COVID-19 firmy kształtowały swoje strategie, opierając się w większym stopniu na prawdopodobieństwie wykrycia niż na kosztach takich działań. Badanie stanowi głos w dyskusji nad jakością zysków jako kluczowego elementu raportowania i nad jej znaczeniem w finansach przedsiębiorstw, które to elementy dla interesariuszy firmy są nie do przecenienia.

show abstract

“…The fact that various types of qualitative information from SEC filings can move stock prices means that investors expect this information to materialize into cash flows at some point in the future and would adjust the firm value downward if that is not eventually the case. Indeed, when such mentions are an unsubstantiated attempt at window dressing, any short-term positive effects they may have on IPO value are fully corrected by investors over the long term (Liziṅska and Czapiewski 2019).…”

Section: Innovation Potential At the Time Of An Ipomentioning

confidence: 99%

Innovation Potential, Insider Sales, and IPO Performance: How Firms Can Mitigate the Negative Effect of Insider Selling

Cao¹,

Song²,

Sorescu³

et al. 2023

Journal of Marketing

View full text Add to dashboard Cite

At the time of an initial public offering (IPO), firms seek to maximize their stock market value. The authors theorize and show that a firm’s innovation potential— firm outputs and activities that contribute to the development of future new products— can be used by the managers of IPO firms as a credible signal of the quality of the firm. Using a sample of 370 IPO firms from the consumer-packaged goods and pharmaceutical industries, and three metrics of innovation potential, the authors show that firms’ innovation potential is (1) positively associated with the initial value of the IPO and with the first day IPO returns, and (2) negatively associated with the extent to which insiders sell their shares at the time of the IPO. The effectiveness of the three metrics of innovation potential as a signal of firm quality varies: patents have a stronger impact on insider sales than preannouncements and generic references to future innovation, while preannouncements have the strongest impact on first day IPO returns. The paper presents a nuanced view of the extent to which various firm stakeholders consider information about firms’ innovation potential to be a credible signal that reduces the adverse selection present in IPO deals with insider sales.

show abstract

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

Cited by 8 publications

References 62 publications

Persistence of pre-IPO earnings of new companies from CEE stock markets

Persistence of pre-IPO earnings of new companies from CEE stock markets

Earnings Management amid the COVID-19 Financial Crisis: The Experience of Poland

Innovation Potential, Insider Sales, and IPO Performance: How Firms Can Mitigate the Negative Effect of Insider Selling

Contact Info

Product

Resources

About