Earnings Management by Russian Сompanies at the Initial Public Offering
The article discloses the issues related to the manipulation of earnings (earnings management) by Russian companies at the initial public offering (the initial public offering, hereinafter IPO). The ability to manage earnings is initially embedded in accounting standards that allow various accountin...
| Main Authors: | , |
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| Format: | Article |
| Language: | Russian |
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Government of the Russian Federation, Financial University
2019-02-01
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| Series: | Финансы: теория и практика |
| Subjects: | |
| Online Access: | https://financetp.fa.ru/jour/article/view/825 |
| _version_ | 1797878717141221376 |
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| author | E. D. Nikulin A. A. Sviridov |
| author_facet | E. D. Nikulin A. A. Sviridov |
| author_sort | E. D. Nikulin |
| collection | DOAJ |
| description | The article discloses the issues related to the manipulation of earnings (earnings management) by Russian companies at the initial public offering (the initial public offering, hereinafter IPO). The ability to manage earnings is initially embedded in accounting standards that allow various accounting alternatives. The earnings management virtually can be not only legal, but also illegal (fraudulent). Illegal earnings management can also lead to bankruptcy. Considering possible negative effect for both the company and its counterparties, it should be analyzed when the earnings management is used and by what means. The increase in capital attracted to a company as a result of IPO is traditionally regarded as one of the most common reasons for the earnings management. The issue has been actively studied by foreign researchers (primarily in developed markets) while Russian companies basically lack such studies. This fact makes the current work relevant. The objective of the article is to determine the accounting tools for the earnings management in Russian companies at the initial public offering. The research has used a sample of 66 Russian companies that carried out IPOs on Russian trading floors from 2004 to 2016. For the analysis, a peer company which did not make an IPO in the corresponding year was selected for each of these companies. The necessary information has been collected from the SKRIN, Thomson Reuters, Prequeca and Zephyr databases. Correlation and regression analysis and mean-comparison statistical tests have been used. According to the study results, Russian companies manage earnings in the year of their IPO. In the same year, the IPO companies show higher values of abnormal receivables and inventories compared to the peers which did not make an IPO. This result indicates the intention of the companies offering the shares to inflate their profts. The article also shows that the earnings management level of IPO frms is inversely related to the subsequent proftability of the company’s shares both within three-year and fve-year periods. The research results are signifcant for a wide range of external users of the company’s accounting information. In particular, potential investors can consider the results while analyzing the frms whose shares they intend to buy at the IPO. Government bodies can use the relevant results to analyze the feasibility of changes in accounting standards, as well as in the legislation regulating the placement of securities by companies. |
| first_indexed | 2024-04-10T02:37:37Z |
| format | Article |
| id | doaj.art-228a16d9f3134993af3bb334e1598ee4 |
| institution | Directory Open Access Journal |
| issn | 2587-5671 2587-7089 |
| language | Russian |
| last_indexed | 2024-04-10T02:37:37Z |
| publishDate | 2019-02-01 |
| publisher | Government of the Russian Federation, Financial University |
| record_format | Article |
| series | Финансы: теория и практика |
| spelling | doaj.art-228a16d9f3134993af3bb334e1598ee42023-03-13T07:49:29ZrusGovernment of the Russian Federation, Financial UniversityФинансы: теория и практика2587-56712587-70892019-02-0123114716410.26794/2587-5671-2019-23-1-147-164707Earnings Management by Russian Сompanies at the Initial Public OfferingE. D. Nikulin0A. A. Sviridov1Санкт-Петербургский государственный университет, Институт «Высшая школа менеджмента»Санкт-Петербургский государственный университет, Институт «Высшая школа менеджмента»The article discloses the issues related to the manipulation of earnings (earnings management) by Russian companies at the initial public offering (the initial public offering, hereinafter IPO). The ability to manage earnings is initially embedded in accounting standards that allow various accounting alternatives. The earnings management virtually can be not only legal, but also illegal (fraudulent). Illegal earnings management can also lead to bankruptcy. Considering possible negative effect for both the company and its counterparties, it should be analyzed when the earnings management is used and by what means. The increase in capital attracted to a company as a result of IPO is traditionally regarded as one of the most common reasons for the earnings management. The issue has been actively studied by foreign researchers (primarily in developed markets) while Russian companies basically lack such studies. This fact makes the current work relevant. The objective of the article is to determine the accounting tools for the earnings management in Russian companies at the initial public offering. The research has used a sample of 66 Russian companies that carried out IPOs on Russian trading floors from 2004 to 2016. For the analysis, a peer company which did not make an IPO in the corresponding year was selected for each of these companies. The necessary information has been collected from the SKRIN, Thomson Reuters, Prequeca and Zephyr databases. Correlation and regression analysis and mean-comparison statistical tests have been used. According to the study results, Russian companies manage earnings in the year of their IPO. In the same year, the IPO companies show higher values of abnormal receivables and inventories compared to the peers which did not make an IPO. This result indicates the intention of the companies offering the shares to inflate their profts. The article also shows that the earnings management level of IPO frms is inversely related to the subsequent proftability of the company’s shares both within three-year and fve-year periods. The research results are signifcant for a wide range of external users of the company’s accounting information. In particular, potential investors can consider the results while analyzing the frms whose shares they intend to buy at the IPO. Government bodies can use the relevant results to analyze the feasibility of changes in accounting standards, as well as in the legislation regulating the placement of securities by companies.https://financetp.fa.ru/jour/article/view/825манипулирование прибыльюроссийские компаниипервичные размещения акцийабнормальная доходностьдоходность акций компании |
| spellingShingle | E. D. Nikulin A. A. Sviridov Earnings Management by Russian Сompanies at the Initial Public Offering Финансы: теория и практика манипулирование прибылью российские компании первичные размещения акций абнормальная доходность доходность акций компании |
| title | Earnings Management by Russian Сompanies at the Initial Public Offering |
| title_full | Earnings Management by Russian Сompanies at the Initial Public Offering |
| title_fullStr | Earnings Management by Russian Сompanies at the Initial Public Offering |
| title_full_unstemmed | Earnings Management by Russian Сompanies at the Initial Public Offering |
| title_short | Earnings Management by Russian Сompanies at the Initial Public Offering |
| title_sort | earnings management by russian сompanies at the initial public offering |
| topic | манипулирование прибылью российские компании первичные размещения акций абнормальная доходность доходность акций компании |
| url | https://financetp.fa.ru/jour/article/view/825 |
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