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Accounting Choices of Issuers of Initial Public Offerings

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  • JOHN M. FRIEDLAN

Abstract

. Because there are no market†determined prices for IPO shares before they are sold to investors, issuers and underwriters must use nonprice information about the firm to set the offering price. Accounting†based measures are frequently identified as particularly useful in valuing untraded securities. This paper reports evidence that IPO issuers make income†increasing discretionary accruals in the financial statements released before the offering. This evidence is consistent with the hypothesis that issuers believe that financial statement information affects IPO offering prices. Résumé. Les actions émises dans le cadre d'un premier appel, public à l'épargne n'ayant pas de prix fixé par le marché avant d'être vendues aux investisseurs, les émetteurs et les preneurs ferme doivent utiliser l'information relative à l'entreprise n'ayant pas trait au prix pour établir le prix d'émission. Les mesures d'origine comptable sont souvent considérées comme étant particulièrement utiles dans revaluation de valeurs mobilières non encore négociées. L'auteur démontre que dans les états financiers qu'elles publient avant l'émission, les entreprises qui procèdent à un premier appel public à l'épargne traitent les charges abonnées sur lesquelles elles exercent un pouvoir discrétionnaire de façon à hausser les bénéfices. Cette constatation est conforme à l'hypothèse selon laquelle les émetteurs estiment que l'information contenue dans les états financiers a une incidence sur le cours des actions émises dans le cadre d'un premier appel public à l'épargne.

Suggested Citation

  • John M. Friedlan, 1994. "Accounting Choices of Issuers of Initial Public Offerings," Contemporary Accounting Research, John Wiley & Sons, vol. 11(1), pages 1-31, June.
    • Handle: RePEc:wly:coacre:v:11:y:1994:i:1:p:1-31
    DOI: 10.1111/j.1911-3846.1994.tb00434.x
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    References listed on IDEAS

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