IPO profit guarantees and income smoothing
A unique feature of the initial public offering (IPO) market in Malaysia during 1996-1999 was the imposition of IPO profit guarantees for a three-year period subsequent to listing on the major shareholders of the newly listed Second Board companies. This study investigated the income smoothing behav...
| Main Authors: | , |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
Universiti Utara Malaysia
2003
|
| Subjects: | |
| Online Access: | https://repo.uum.edu.my/id/eprint/155/1/Wan_Nordin_Wan-Hussin.pdf |
| _version_ | 1825739637093564416 |
|---|---|
| author | Wan Hussin, Wan Nordin Ripain, Noraizan |
| author_facet | Wan Hussin, Wan Nordin Ripain, Noraizan |
| author_sort | Wan Hussin, Wan Nordin |
| collection | UUM |
| description | A unique feature of the initial public offering (IPO) market in Malaysia during 1996-1999 was the imposition of IPO profit guarantees for a three-year period subsequent to listing on the major shareholders of the newly listed Second Board companies. This study investigated the income smoothing behavior on a sample of 92 IPO companies with profit guarantees, of which 54 of them reported profit guarantee surpluses.For each of the companies, Eckel's income smooting Index (1981) is calculated based on two subperiods i.e.(1) ten-year period comprising five years before and five years after listing and (2)profit guarantee period.The evidence indicates that there is no significant difference in income smoothing between companies with IPO profit guarantee surplus and IPO profit guarantee shortfall for both sub-periods. We argue that the controlling shareholders need not resort to income smooting to avoid the costly profit guarantee shortfall as they could easily seek variations in the original profit guarantee agreement. Further analyses show that income smoothing is more prevalent among smaller companies and construction companies, based on a ten-year period but not the profit guarantee period. |
| first_indexed | 2024-07-04T05:12:41Z |
| format | Article |
| id | uum-155 |
| institution | Universiti Utara Malaysia |
| language | English |
| last_indexed | 2024-07-04T05:12:41Z |
| publishDate | 2003 |
| publisher | Universiti Utara Malaysia |
| record_format | eprints |
| spelling | uum-1552010-07-07T03:21:25Z https://repo.uum.edu.my/id/eprint/155/ IPO profit guarantees and income smoothing Wan Hussin, Wan Nordin Ripain, Noraizan HG Finance A unique feature of the initial public offering (IPO) market in Malaysia during 1996-1999 was the imposition of IPO profit guarantees for a three-year period subsequent to listing on the major shareholders of the newly listed Second Board companies. This study investigated the income smoothing behavior on a sample of 92 IPO companies with profit guarantees, of which 54 of them reported profit guarantee surpluses.For each of the companies, Eckel's income smooting Index (1981) is calculated based on two subperiods i.e.(1) ten-year period comprising five years before and five years after listing and (2)profit guarantee period.The evidence indicates that there is no significant difference in income smoothing between companies with IPO profit guarantee surplus and IPO profit guarantee shortfall for both sub-periods. We argue that the controlling shareholders need not resort to income smooting to avoid the costly profit guarantee shortfall as they could easily seek variations in the original profit guarantee agreement. Further analyses show that income smoothing is more prevalent among smaller companies and construction companies, based on a ten-year period but not the profit guarantee period. Universiti Utara Malaysia 2003 Article PeerReviewed application/pdf en https://repo.uum.edu.my/id/eprint/155/1/Wan_Nordin_Wan-Hussin.pdf Wan Hussin, Wan Nordin and Ripain, Noraizan (2003) IPO profit guarantees and income smoothing. Analisis, 10 (2). pp. 119-137. ISSN 0127-8983 http://ijms.uum.edu.my |
| spellingShingle | HG Finance Wan Hussin, Wan Nordin Ripain, Noraizan IPO profit guarantees and income smoothing |
| title | IPO profit guarantees and income smoothing |
| title_full | IPO profit guarantees and income smoothing |
| title_fullStr | IPO profit guarantees and income smoothing |
| title_full_unstemmed | IPO profit guarantees and income smoothing |
| title_short | IPO profit guarantees and income smoothing |
| title_sort | ipo profit guarantees and income smoothing |
| topic | HG Finance |
| url | https://repo.uum.edu.my/id/eprint/155/1/Wan_Nordin_Wan-Hussin.pdf |
| work_keys_str_mv | AT wanhussinwannordin ipoprofitguaranteesandincomesmoothing AT ripainnoraizan ipoprofitguaranteesandincomesmoothing |