NDLI: Do initial public offering firms manage accruals? Evidence from individual accounts

Content Provider	Springer Nature Link
Author	Cecchini, Mark Jackson, Scott B. Liu, Xiaotao
Copyright Year	2011
Abstract	We examine whether initial public offering (IPO) firms exercise discretion over an individual accrual account on the balance sheet—the allowance for uncollectible accounts—and an individual accrual account on the income statement—bad debt expense. Our research design exploits a unique disclosure requirement related to these accounts (i.e., the ex post disclosure of write-offs of uncollectible accounts), which enables us to develop refined expectation models. We provide evidence that IPO firms have conservative, not aggressive, allowances in the annual periods adjacent to their stock offerings. In fact, the average IPO firm has an allowance that is over four-times leading write-offs. We also provide evidence that IPO firms record larger, not smaller, bad debt expense and are less likely to record income-increasing bad debt expense than matched non-IPO firms. These results challenge the view that IPO firms understate receivables-related accrual accounts.
Starting Page	22
Ending Page	40
Page Count	19
File Format	PDF
ISSN	13806653
Journal	Review of Accounting Studies
Volume Number	17
Issue Number	1
e-ISSN	15737136
Language	English
Publisher	Springer US
Publisher Date	2011-06-04
Publisher Place	Boston
Access Restriction	One Nation One Subscription (ONOS)
Subject Keyword	Initial public offering Earnings management Allowance for uncollectible accounts Bad debt expense Finance/Investment/Banking Public Finance & Economics Accounting/Auditing
Content Type	Text
Resource Type	Article
Subject	Accounting

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