Opportunism and the Related Consequences in the IPO Setting

• DOI: 10.2139/ssrn.1120315
• Publication Date: 2011-12-28T17:40:09Z
• Authors: Mary Brooke Billings; Melissa Fay Lewis
• Keywords: Opportunism

Despite the presence of a number studies that examine financial reporting at IPO, link between opportunism and post-IPO penalties (including litigation) remains undocumented. The absence this may stem from noise introduced by relaxed legal requirements (along with other unique features) in IPO setting or, alternatively, it might relate to methodological issues make detecting difficult. Yet, evidence is important, as indicates ex ante incentives report conservatively. Accordingly, paper occurrence tests its connection consequences. In contrast recent research documenting firms' conservative (relative their own private firms), we find no suggest average firm reports more conservatively than similar public firms. These findings leave role for settling up mechanisms when abnormal accruals reflect opportunistic misreporting. Consistent notion post settling-up play an important setting, document subsequent and, limited extent, managers. Further analysis increased manipulate, relation strengthens. At same time, also discretion likely reflects information (as opposed opportunism) less trigger penalties.