Earnings Quality and International IPO Underpricing

2011 ◽  
Vol 86 (2) ◽  
pp. 483-505 ◽  
Author(s):  
Thomas J. Boulton ◽  
Scott B. Smart ◽  
Chad J. Zutter
Keyword(s):  
Earnings Quality ◽  
Ipo Underpricing ◽  
Japanese Market ◽  
Public Firms ◽  
Earnings Information ◽  
Country Level ◽  
Specific Factors ◽  
The Impact ◽  
The U.S ◽  
Country Specific

ABSTRACT: This study examines the impact of country-level earnings quality on IPO underpricing. Examining 10,783 IPOs from 37 countries, we find that IPOs are underpriced less in countries where public firms produce higher quality earnings information. This finding persists after controlling for other deal- and country-specific factors that affect IPO underpricing, and it is driven neither by the large and relatively transparent markets in the U.S. and U.K. nor by the relatively opaque Japanese market. The impact of low earnings quality on underpricing is partially offset by the use of a top-tier underwriter.

scholarly journals The Impact of ESG Management on Investment Decision: Institutional Investors’ Perceptions of Country-Specific ESG Criteria

2021 ◽  
Vol 9 (3) ◽  
pp. 48
Author(s):  
So Ra Park ◽  
Jae Young Jang
Keyword(s):  
South Korea ◽  
Institutional Investors ◽  
Investment Decision ◽  
Investment Decisions ◽  
Specific Model ◽  
Country Level ◽  
Unstable Environment ◽  
Specific Factors ◽  
The Impact ◽  
Country Specific

Existing global ESG models are limited in terms of applicability and predictability, especially in countries with an unstable environment. On the other hand, utilizing internally made or privately sourced ESG models have caused issues relating to generalizability, comparability, and continuity. In our research, we present an ESG framework that is specific to South Korea, which has both global and country-specific factors in all three categories. The AHP model is used to determine how the three categories’ materiality would be viewed by institutional investors as well as how country-specific factors rank against global factors. The results of this study show that institutional investors place more importance on environmental and governance factors compared to social factors. Factors including shareholders’ rights, pollution and waste, greenhouse gas emissions, and risk and opportunity management are found to have greater influences on investors’ investment decisions. In addition, it was confirmed that both of the country-specific variables for South Korea, partnership with subcontractor and CEO reputation, have a significant influence on investment decisions. By having the ESG model validated by institutional investors, who are the main users of ESG disclosures of corporations, our methodology of presenting a country-specific model can be benchmarked by studies on other emerging markets with a variety of country-level specificities.

How Would the Mandatory Adoption of IFRS Affect the Earnings Quality of U.S. Firms? Evidence from Cross-Listed Firms in the U.S.

2011 ◽  
Vol 25 (4) ◽  
pp. 837-860 ◽  
Author(s):  
Jerry Sun ◽  
Steven F. Cahan ◽  
David Emanuel
Keyword(s):  
Earnings Quality ◽  
Discretionary Accruals ◽  
Earnings Persistence ◽  
Listed Firms ◽  
Ifrs Adoption ◽  
The Cross ◽  
The Impact ◽  
Timely Loss Recognition ◽  
The U.S

SYNOPSIS We examine the impact of IFRS adoption on the earnings quality of foreign firms cross-listed in the U.S. from countries that have already adopted IFRS on a mandatory basis. We use the cross-listed firms as surrogates for the U.S. firms so we can observe the effect of IFRS adoption in the U.S. We examine five measures of earnings quality related to discretionary accruals, target beating, earnings persistence, timely loss recognition, and the earnings response coefficient (ERC). To isolate the effect of IFRS adoption, we use a matched sample design where each cross-listed firm is matched to a U.S. firm. We find the difference in earnings quality from the pre- to post-IFRS period is not different for the cross-listed and matched firms when earnings quality is measured by absolute discretionary accruals, timely loss recognition, or a long-window ERC. However, for the incidence of small positive earnings and earnings persistence, we find significant difference-in-differences, indicating that IFRS adoption led to an improvement in earnings quality for cross-listed firms relative to the matched firms. Our results are slightly surprising since U.S. GAAP is generally viewed as high-quality standards with little room for improvement.

scholarly journals The Impact of the COVID-19 Pandemic on the U.S. Economy: Evidence from the Stock Market

2020 ◽  
Vol 13 (10) ◽  
pp. 233
Author(s):  
Willem Thorbecke
Keyword(s):  
Real Estate ◽  
Stock Market ◽  
Stock Returns ◽  
Electrical Equipment ◽  
Production Equipment ◽  
Macroeconomic Factors ◽  
Specific Factors ◽  
The Impact ◽  
Macroeconomic Environment ◽  
The U.S

The coronavirus crisis has damaged the U.S. economy. This paper uses the stock returns of 125 sectors to investigate its impact. It decomposes returns into components driven by sector-specific factors and by macroeconomic factors. Idiosyncratic factors harmed industries such as airlines, aerospace, real estate, tourism, oil, brewers, retail apparel, and funerals. There are thus large swaths of the economy whose recovery depends not on the macroeconomic environment but on controlling the pandemic. Macroeconomic factors generated losses in industries such as production equipment, machinery, and electronic and electrical equipment. Thus, reviving capital goods spending requires not just an end to the pandemic but also a macroeconomic recovery.

scholarly journals Does Manager Ability Influence Prospectus Earnings Quality and IPO Underpricing?

2018 ◽  
Vol 8 (1) ◽  
pp. 1
Author(s):  
Stephanie A. Hairston ◽  
Ji Yu ◽  
Zenghui Liu
Keyword(s):  
Initial Public Offering ◽  
Financial Reporting ◽  
Earnings Quality ◽  
Reporting Quality ◽  
Preliminary Evidence ◽  
High Ability ◽  
Ipo Underpricing ◽  
Positive Effects ◽  
Public Offering ◽  
The Impact

Prior literature suggests that manager ability influences several factors, including financial reporting quality, key to the bargaining power of an issuing firm during their initial public offering (IPO). However, we also know that high ability managers are better able to engage in and conceal opportunistic behavior which may dampen any positive effects their abilities have in the IPO process. Given the conflicting affect that managerial ability may have on financial reporting and firm performance in the IPO setting, we examine the impact of manager ability on prospectus earnings quality and IPO underpricing. We find that IPO firms with high ability managers tend to have better earnings quality and are less underpriced than firms with low ability managers. We also find preliminary evidence that equity ownership strengthens the relationship between manager ability and IPO underpricing. Our findings are consistent with the streams of literature suggesting that better managers produce higher quality earnings and raise more capital during the IPO to invest in future growth opportunities if they are closely monitored. These findings should be useful to issuing firms considering hiring high caliber managers, investors in evaluating IPO firms, and researchers in examining the influence of human capital on IPO underpricing. 

Corporate social responsibility and earnings quality: do institutional features matter?

2019 ◽  
Vol 11 (1) ◽  
pp. 54-92
Author(s):  
Habib Jouber
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Earnings Management ◽  
Earnings Quality ◽  
Method Of Moment ◽  
Content Type ◽  
Country Level ◽  
Institutional Features ◽  
Corporate Social ◽  
The Impact

Purpose This paper aims to examine whether corporate social responsibility (CSR) is associated with firms’ earnings quality (EQ) and how this association is context-specific. The authors consider specific institutional differences in strength of corporate governance (CG) attributes, quality of law enforcement and level of investor protection found between Anglo-American, European and South-Eastern Asian CG models to test the impact of above country-level factors on this association. Design/methodology/approach To test the association between CSR and EQ, the authors consider EIRIS (Ethical Investment Research Service) (2018) CSR issues of sustainability indicators as proxy to capture CSR. Following Rezaee and Tuo’s (2019) study, the authors classify EQ into innate earnings quality (IEQ) and discretionary earnings quality (DEQ). The authors investigate the innate (discretionary) EQ as to refer to firm’s inherent operating uncertainty (earnings management). Several dependency models for panel data applying the generalized method of moment (GMM) estimator of Arellano and Bond (1991) are ruled based on archival data of 4,206 non-financial international listed firms over the period 2012-2017. Findings Univariate and GMM multivariate cross-country analyses show that CSR is positively associated with EQ and that this association is more pronounced for firms within countries where good CG tools and higher investor right protection are preserved. The authors interpret the findings as evidence that the CSR-EQ association is shaped by the degree of monitoring role played by institutional features at the country level. The results are robust to a battery of robustness tests. Originality/value The originality of this research is twice. On the one hand, it examines whether CSR is a reflection of manager’s ethical opportunistic behavior resultant on earnings quality derived from a firm’s innate traits. On the second hand, it tests whether CSR is a reflection of discretionary earnings quality manifested by earnings management behavior. This paper is the first to support that institutional features significantly matter when investigating the association between CSR and EQ.

FINANCIAL INCLUSION, POVERTY, AND INCOME INEQUALITY

2018 ◽  
Vol 63 (01) ◽  
pp. 185-206 ◽  
Author(s):  
CYN-YOUNG PARK ◽  
ROGELIO MERCADO
Keyword(s):  
Income Inequality ◽  
Rule Of Law ◽  
Financial Inclusion ◽  
Full Sample ◽  
Factors Affecting ◽  
Specific Factors ◽  
The Impact ◽  
Asian Sample ◽  
Country Specific ◽  
Do So

This paper extends the existing literature on financial inclusion by analyzing the factors affecting financial inclusion and assessing the impact of financial inclusion on poverty and income inequality in the world and Asia. We construct a new financial inclusion indicators to assess various macroeconomic and country-specific factors affecting the degree of financial inclusion for 176 economies, including 37 of which from developing Asia. We test the impact of financial inclusion, along with other control variables, on poverty and income inequality. We do so for full sample of countries and then for developing Asia sample to access which factors are relevant for full sample and for developing Asia specifically. The estimation results show that per capita income, rule of law, and demographic characteristics significantly affect financial inclusion for both world and Asia samples. However, primary education completion and literacy significantly increases financial inclusion only in the full sample, not for the Asian sample. The findings also indicate that financial inclusion is significantly correlated with lower poverty and income inequality levels for the full sample. For developing Asia, however, there appears to be no link between financial inclusion and income inequality.

Earnings Quality Assessment by a Sell-Side Financial Analyst

2002 ◽  
Vol 17 (4) ◽  
pp. 361-368
Author(s):  
Bart Kamp
Keyword(s):  
Quality Assessment ◽  
Cash Flow ◽  
Earnings Quality ◽  
Real Life ◽  
Financial Analyst ◽  
The Impact ◽  
The U.S

The paper presents an instructional case on earnings quality. The case is based on a real-life financial analyst's report on the acquisition of the U.S. publisher CCH by the Dutch publisher Wolters Kluwer. Although the analyst believed that CCH was a sound investment, he downgraded his buy recommendation on Wolters Kluwer because of the deterioration of earnings quality, caused by a seemingly unusual accounting method for restructuring costs following the acquisition. The questions for discussion address the differences between management and analysts in their preferred earnings patterns, the impact of goodwill accounting on earnings quality, the backgrounds and rationales for the earnings adjustments the analyst made, and whether cash flow accounting would solve the problem.

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