Earnings management and long-run stock performance following private equity placements

De Wai Chou, Michael Gombola, Feng Ying Liu

    Research output: Contribution to journalArticlepeer-review

    13 Citations (Scopus)

    Abstract

    We investigate whether the documented earnings management preceding public equity offerings applies to private placements of equity. We also investigate whether earnings management can help explain long-run stock performance following private placements. Our main findings are: (1) little evidence of upward earnings management around private equity placements, and (2) little predictive power of abnormal accruals for long-run stock performance following private equity placements. These results suggest that earnings management is not responsible for post-offering underperformance, if any, for firms issuing equity privately. Our results are robust to two alternative measures of earnings management and three measures of abnormal returns estimated over two sample periods.

    Original languageEnglish
    Pages (from-to)225-245
    Number of pages21
    JournalReview of Quantitative Finance and Accounting
    Volume34
    Issue number2
    DOIs
    Publication statusPublished - 2010 Feb 1

    Keywords

    • Earnings management
    • Long-run performance
    • Private equity issues

    ASJC Scopus subject areas

    • Accounting
    • Business, Management and Accounting(all)
    • Finance

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