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Company Profitability Before and After IPO. Is it a Windows Dressing or Equity Dilution Effect?

Author

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  • Radosław Pastusiak
  • Monika Bolek
  • Maciej Malaczewski
  • Marta Kacprzyk

Abstract

This paper relates to the initial public offering problem and companies' profitability levels before and after this event. In the presented study, profitability ratios in the year before initial public offering increase over the previous year, and then, after the IPO, fall. This confirms the phenomenon of distorting the level of profit before the IPO and partially equity dilution after the IPO.

Suggested Citation

  • Radosław Pastusiak & Monika Bolek & Maciej Malaczewski & Marta Kacprzyk, 2016. "Company Profitability Before and After IPO. Is it a Windows Dressing or Equity Dilution Effect?," Prague Economic Papers, Prague University of Economics and Business, vol. 2016(1), pages 112-124.
    • Handle: RePEc:prg:jnlpep:v:2016:y:2016:i:1:id:540:p:112-124
    DOI: 10.18267/j.pep.540
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    References listed on IDEAS

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    4. Ahmed S Alanazi & Benjamin Liu, 2013. "IPO financial and operating performance: Evidence from the six countries of the GCC," Discussion Papers in Finance finance:201304, Griffith University, Department of Accounting, Finance and Economics.
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    6. Gijoon Hong & Stavros Peristiani, 2004. "Pre-IPO financial performance and aftermarket survival," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 10(Feb).
    7. Aharony, J & Lee, CWJ & Wong, TJ, 2000. "Financial packaging of IPO firms in China," Journal of Accounting Research, Wiley Blackwell, vol. 38(1), pages 103-126.
    8. Loughran, Tim & Ritter, Jay R, 1997. "The Operating Performance of Firms Conducting Seasoned Equity Offerings," Journal of Finance, American Finance Association, vol. 52(5), pages 1823-1850, December.
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    Cited by:

    1. Hai Long & Xiaochen Lin & Yu Chen, 2021. "Why the Operating Performance of Post-IPO Firms Decreases: Evidence from China," JRFM, MDPI, vol. 14(9), pages 1-15, September.

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    More about this item

    Keywords

    window dressing; ROE; ROA; IPO; corporate finance; capital market;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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