An Investigation Of Earnings Management in Indonesian manufacturing initial public offerings

This papere.vamines whether the issuers ofindonesian manufacturing initial public offerings (1P0s) manage the firm's reported earnings by making income increasing discretionary accruals. The absence of market-determined prices for IPO shares prior to the c.)ffering has made issuers and underwriters to use nonprice information. The test sous performed on a sample of 451POs that Ivent public during the period of July 1991 through December 1994. The model used in this study follows the one developed by Priedlan ( 1994). The results show that there is no evidence that earnings management occurs among the samplefirms. In other words. this study is unable to reject the null hypothesis that the issuers of-Indonesian IPOs exercise accounting discretion that increases the reported earnings in the periods prior to the offering. hr contrast, the study finds strong evidence of earnings management in the period after the offering, which could be interpreted as issuers Irving to maintain the firm's performance after the offering by making income increasing discretionary accruals. Keywords: enmings management: initial public offerikgs: total LICCrtlak and discretionary accrual