Review of Accounting Studies, 3, 209–221 (1998) ° c 1998 Kluwer Academic Publishers, Boston. Manufactured in The Netherlands. Discussion of “Are Accruals during Initial Public Offerings Opportunistic?” M. D. BENEISH Indiana University, Kelley School of Business The objective of the paper, “Are Accruals during Initial Public Offerings Opportunistic?” by Siew Hong Teoh, T. J. Wong, and Gita R. Rao (1998) (TWR, hereafter), is to investigate earnings management as an explanation for the new issues anomaly. I am aware of four studies that investigate earnings management as an explanation for the puzzling behavior of stock prices post-issuance. TWR and Teoh, Welch and Wong (1998a) study earnings management in the context of initial public offerings (IPO), and Rangan (1998) and Teoh, Welch and Wong (1998b) do so in the context of seasoned equity offerings. These studies share the common approach of (i) estimating the extent of earnings man- agement around the time of the security issuance, and (ii) correlating their earnings man- agement estimates with post-issue earnings and returns. The evidence presented is gener- ally consistent across studies and suggests that estimates of at-issue earnings management are signiﬁcantly negatively correlated with subsequent earnings and returns performance. Speciﬁcally, these studies ﬁnd that
Review of Accounting Studies – Springer Journals
Published: Oct 6, 2004
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