Earnings management under information asymmetry at initial public offerings in Egypt : an empirical study

Abstract EN

Purpose – The purpose of this thesis is to explore earnings management under information asymmetry at initial public offerings (IPO).

More specifically, the researcher tried to explain the opportunities and incentives of earnings management at IPO and how firm managers may exploit the discretion available to them in manage earnings.

Methodology/Approach – The researcher depended upon the positive approach in analyzing the problem, explaining its causes and predicting the behavior of this phenomenon in the future.

Findings –the results indicated that IPO Egyptian firms use earnings management during the year of IPO in order to induce investor to buy their shares to maximize their IPO proceeds and also show that a higher level of increase in accruals is accompanied by a higher level of information asymmetry in the IPO year compared with the Pre-IPO year & the Post- IPO year.

Research Limitations – This study is applied on a sample of companies listed on the Egyptian Stock Exchange.

All study data and results for Egyptian companies only.

Originality/Value – This study contributed to the literature by providing explanation of the phenomenon of earnings management and its motivations at IPO.

Moreover, this study exhibits opportunities of earnings management through discussing some techniques of earnings management in details.