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Does accounting method choice for business combination influence IPO valuation?

There are numerous studies that examined the choice of accounting methods by IPO firms as a device to manage earnings prior to going public (Aharony et al.,1993; Friedlan,1994; Neill et al., 1995; Black et al.,2002).This study extends Neill et al.(1995) by examining the association between account...

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Main Authors: Wan Hussin, Wan Nordin, Mohamed Zin, Nazmi
Format: Conference or Workshop Item
Language:English
Published: 2005
Subjects:
HF5601 Accounting
Online Access:http://repo.uum.edu.my/11882/1/1.pdf
http://repo.uum.edu.my/11882/
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spelling my.uum.repo.118822014-08-12T02:38:04Z http://repo.uum.edu.my/11882/ Does accounting method choice for business combination influence IPO valuation? Wan Hussin, Wan Nordin Mohamed Zin, Nazmi HF5601 Accounting There are numerous studies that examined the choice of accounting methods by IPO firms as a device to manage earnings prior to going public (Aharony et al.,1993; Friedlan,1994; Neill et al., 1995; Black et al.,2002).This study extends Neill et al.(1995) by examining the association between accounting method choice and IPO valuation in Malaysia.However, instead of using accounting policies that are related to depreciation and inventory ,this study looks at accounting method for business combination namely the purchase vs. merger method.By examining 62 IPOs during 2001 and 2002, the multivariate analysis shows that, consistent with the hypotheses, the liberal accounting method for business combination is positively associated with offer price and negatively associated with first day closing price and underpricing.However, none of the coefficients associated with accounting method are statistically significant.IPO offer price is positively influenced by forecasted earnings, net tangible assets and firm size. First day closing price is significantly influenced by forecasted earnings.IPO consists of exclusively new sham issue (i.e. participation ratio by IPO entrepreneurs equals zero) yields higher underpricing consistent with Habib and Ljungqvist (2001).As expected, another important determinant of IPO underpricing is oversubscription rate with highly oversubscription 1PO generates greater underpricing. 2005 Conference or Workshop Item NonPeerReviewed application/pdf en http://repo.uum.edu.my/11882/1/1.pdf Wan Hussin, Wan Nordin and Mohamed Zin, Nazmi (2005) Does accounting method choice for business combination influence IPO valuation? In: 6th Emerging Issues in International Acconting & Business Conference, 24-26 June 2004, University of Padova, Italy. (Unpublished)
institution Universiti Utara Malaysia
building UUM Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Utara Malaysia
content_source UUM Institutionali Repository
url_provider http://repo.uum.edu.my/
language English
topic HF5601 Accounting
spellingShingle HF5601 Accounting
Wan Hussin, Wan Nordin
Mohamed Zin, Nazmi
Does accounting method choice for business combination influence IPO valuation?
description There are numerous studies that examined the choice of accounting methods by IPO firms as a device to manage earnings prior to going public (Aharony et al.,1993; Friedlan,1994; Neill et al., 1995; Black et al.,2002).This study extends Neill et al.(1995) by examining the association between accounting method choice and IPO valuation in Malaysia.However, instead of using accounting policies that are related to depreciation and inventory ,this study looks at accounting method for business combination namely the purchase vs. merger method.By examining 62 IPOs during 2001 and 2002, the multivariate analysis shows that, consistent with the hypotheses, the liberal accounting method for business combination is positively associated with offer price and negatively associated with first day closing price and underpricing.However, none of the coefficients associated with accounting method are statistically significant.IPO offer price is positively influenced by forecasted earnings, net tangible assets and firm size. First day closing price is significantly influenced by forecasted earnings.IPO consists of exclusively new sham issue (i.e. participation ratio by IPO entrepreneurs equals zero) yields higher underpricing consistent with Habib and Ljungqvist (2001).As expected, another important determinant of IPO underpricing is oversubscription rate with highly oversubscription 1PO generates greater underpricing.
format Conference or Workshop Item
author Wan Hussin, Wan Nordin
Mohamed Zin, Nazmi
author_facet Wan Hussin, Wan Nordin
Mohamed Zin, Nazmi
author_sort Wan Hussin, Wan Nordin
title Does accounting method choice for business combination influence IPO valuation?
title_short Does accounting method choice for business combination influence IPO valuation?
title_full Does accounting method choice for business combination influence IPO valuation?
title_fullStr Does accounting method choice for business combination influence IPO valuation?
title_full_unstemmed Does accounting method choice for business combination influence IPO valuation?
title_sort does accounting method choice for business combination influence ipo valuation?
publishDate 2005
url http://repo.uum.edu.my/11882/1/1.pdf
http://repo.uum.edu.my/11882/
_version_ 1644280761679872000
score 13.211869

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