Earnings management, initial public offerings and corporate governance - evidence from Singapore.

Abstract

In this study, we seek to investigate the earnings manipulation behaviour exhibited amongst firms listed in Singapore, preceding their initial public offering (IPO) issuance. We investigate how earnings management and earnings manipulation behaviour of firms differ under different restrictions and when corporate governance is imposed. Our sample consists of 31 firms across various industries that issue IPO during the period 2002-2004. Results from the first part of our study show that IPO firms manipulate their discretionary current accruals in the years preceding IPO issue. Besides that, results from the second part of our study indicate that there are no significant differences in the accruals behaviour between IPO firms with at least one-third independent directors on board against those that are not ; IPO firms listed in SESDAQ versus Mainboard; IPO firms having big 5 auditors versus non big 5 auditors ; and IPO firms having prestigious underwriters versus non-prestigious underwriters . One implication from our results could be that the above devices such as high quality auditors and prestigious underwriters do not really matter in restricting the level of managed earnings in Singapore.