An Empirical Study of Factors Affecting Sudden Deteriorations in Performance of Newly Listed Companies in China

Shiqing Xie(Department of Finance, School of Economics, Peking University)
Jieqi Liu(Analyst, Headquarters of Bank of China)

Abstract

Using the three Jones models, this paper analyzes earnings management in newly listed  companies  in  China.  We  find  that  the  use  of  earnings  management  practices  is prevalent among firms in China and these practices increase the possibility of a sudden deterioration  in  performance  (SDP)  for  the  firm.  The  characteristics  of  the   firm’s underwriter or sponsor also significantly impact on the possibility of a SDP. Finally, we find that the financial data of newly listed companies are not good indicators of a SDP

Keywords

Sudden Deterioration in Performance; Earnings Management; Underwriter; Sponsor

References

Aharony, J., Lee,J., Wong, T. J., 2000, Financial Packaging of IPO firms in China, Journal of Accounting Research, (spring).

Chaney, Paul K., and Craig M. Lewis, 1998, Income Smoothing and Underperformance in Initial Public Offering, Journal of Corporate Finance, 4, 1-29.

Lu, Jianqiao, 1999, Study on Earnings Management of Listed Companies in China, The Accounting Research Journal, 9.

Teoh, S.H, Wong, T. J., and Rao, G., 1983, “Are Accruals During Initial Public Offerings Opportunistic?”, Review of Accounting Studies, March.

DOI: http://dx.doi.org/10.26549/jfr.v8i1.18636