Institutional Investors’ Response to Earnings Management Before Initial Public Offering in Poland
Institutional Investors’ Response to Earnings Management Before Initial Public Offering in Poland

Summary/Abstract: The aim of the paper is to analyse the association between the use of accrual-based and realearnings management practices before the company goes public and the decision of institutionalinvestors on buying or refraining from buying shares offered in initial public offering (IPO).The sample consists of 258 Polish new stock companies over the period 2005-2020. We findthat such companies refrain from massive earnings management in the pre-IPO period: bothreal and accrual-based. However, we find evidence that the presence of institutional investorsin the IPO is related to earnings inflation (selling, general and administrative expenses). Our study contributes to the debate on the role of institutional ownership in the IPO processin Central and Eastern Europe.

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