Do insiders manipulate earnings when they sell their shares in an initial public offering?

• 成果类型: Article
• 署名作者: Darrough, M; Rangan, S
• 署名单位: City University of New York (CUNY) System; Baruch College (CUNY); Amrita Vishwa Vidyapeetham
• 刊物名称: JOURNAL OF ACCOUNTING RESEARCH
• ISSN/ISSBN: 0021-8456
• DOI: 10.1111/j.1475-679x.2004.00161.x
• 发表日期: 2005
• 页码: 1-33
• 关键词: research-and-development; operating performance; FIRMS; heteroskedasticity; spillovers; management; returns; MODEL

摘要

In this article we examine whether insider share selling in an initial public offering (IPO) influences R&D expenditures. Insiders (managers and venture capitalists) who sell their pre-offering shareholdings might try to increase the IPO offer price (1) by overinvesting in R&D to signal the firm's prospects (the signaling hypothesis) or (2) by underinvesting in R&D to increase current reported earnings (the earnings fixation hypothesis). We find that, for a sample of 243 IPOs from 1986 to 1990, change in R&D spending in the year of the IPO is negatively related to managerial selling. Because reductions in R&D spending increase current earnings at the expense of future earnings, our evidence suggests that managers believe that investors place more emphasis on current earnings and less emphasis on R&D and therefore spend less on R&D. We also document a positive association between discretionary current accruals in the offering year and managerial selling, suggesting that selling managers manipulate accruals as well.