The Impact of Insider Ownership Stake Changes at the IPO and Earnings Management on Post-IPO Operating Performance

Open Access
Author:
Han, A Leum (Alex)
Area of Honors:
Finance
Degree:
Bachelor of Science
Document Type:
Thesis
Thesis Supervisors:
  • Laura B Field, Thesis Supervisor
  • James Alan Miles, Honors Advisor
Keywords:
  • IPO
  • Earnings Management
  • Insider Ownership
Abstract:
Past academic research reports that post-IPO operating performance can be signaled through or explained by company characteristics in a period immediately preceding or following the IPO. This paper examines whether post-IPO operating performance is correlated with earnings management activities immediately preceding and following the IPO, insider ownership retention rates after the IPO, and percentage of insider ownership changes at the IPO. I also test whether aggressive earnings managers experience worse operating performance measured by operating income over total assets than conservative earnings managers. The results from various regression analyses and t-tests in this paper show that earnings management activities immediately preceding and following the IPO and insider ownership retention rates are not correlated with post-IPO operating performance. However, this paper reports a statistically negative relationship between percentage of insider ownership changes at the IPO and post-IPO operating performance in the issue year.