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 acc...
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HF5601-5689 Accounting Nazmi, Mohamed Zin Does Accounting Method Choice for Business Combination Influence IPO Valuation? |
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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 shares 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 over-subscription rate with highly oversubscribed IPO generates greater underpricing. |
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masters |
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Master's degree |
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Nazmi, Mohamed Zin |
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Nazmi, Mohamed Zin |
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Nazmi, Mohamed Zin |
| title |
Does Accounting Method Choice for Business Combination Influence IPO Valuation? |
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Does Accounting Method Choice for Business Combination Influence IPO Valuation? |
| title_full |
Does Accounting Method Choice for Business Combination Influence IPO Valuation? |
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Does Accounting Method Choice for Business Combination Influence IPO Valuation? |
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Does Accounting Method Choice for Business Combination Influence IPO Valuation? |
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does accounting method choice for business combination influence ipo valuation? |
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Universiti Utara Malaysia |
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Sekolah Siswazah |
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2004 |
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https://etd.uum.edu.my/1369/1/NAZMI_BT._MOHAMED_ZIN.pdf https://etd.uum.edu.my/1369/2/1.NAZMI_BT._MOHAMED_ZIN.pdf |
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my-uum-etd.13692013-07-24T12:11:39Z Does Accounting Method Choice for Business Combination Influence IPO Valuation? 2004 Nazmi, Mohamed Zin Sekolah Siswazah Graduate School HF5601-5689 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 shares 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 over-subscription rate with highly oversubscribed IPO generates greater underpricing. 2004 Thesis https://etd.uum.edu.my/1369/ https://etd.uum.edu.my/1369/1/NAZMI_BT._MOHAMED_ZIN.pdf application/pdf eng validuser https://etd.uum.edu.my/1369/2/1.NAZMI_BT._MOHAMED_ZIN.pdf application/pdf eng public masters masters Universiti Utara Malaysia Aboody, D., R. Kasznik and M. Williams (2000), 'Purchase Versus Pooling in Stock-for-stock Acquisitions: Why do Firm Care?', Journal of Accounting and Economics, Vol. 29, pp. 26 1-286. Aharony, J., C. J. Lin and M. P. Loeb (1993), 'Initial Public Offerings, Accounting Choices and Earnings Management', Contemporary Accounting Research,Vol . Vol. 10 (No.1), (Fall), pp. 61-81. Ang, J. S. and J. C. Brau (2002), 'Firm Transparency and the Costs of Going Public', The Journal of Financial Research, Vol. 25 (No. 1), (Spring), pp. 1-17. Beatty, R. and I. Welch (1996), 'Issuer Expenses and Legal Liability in Initial Public Offerings, . Journal of Law and Economics, Vol. 39, pp. 545-602. Black, E. L., Narktabtee and T. Carnes (2002), 'Earnings Management Around Initial Public Offerings in Thailand. Under review at the Asian Pacific Journal of Accounting and Economics. Brav, A. and P. Gompers (2000), 'Insider Trading Subsequent to Initial Public Offerings: Evidence from Expiration's of Lock-Up Provisions', SSRN Working Paper Series. Certo, S. T., C. M. Daily and D. R. Dalton (2001), ' Signaling Firm Value Through Board Structure: An Investigation of Initial Public Offerings', Entrepreneurship Theory and Practice, (Winter), pp. 33-50. Copeland, R. M. and J. F. Wojdak (1969),'Income Manipulation and the Purchase-Pooling Choice', Journal of Accounting Research, (Autumn), pp. 188-195. Daily, C. M., S. T. Certo, D. R. Dalton and R. Roengpitya (2003), 'IPO Underpricing: A Meta-Analysis and Research Synthesis', Entrepreneurship Theory and Practice,(Spring), pp. 271-295. Dunne. K. M. (1990). 'An Empirical Analysis of management's Choice of Accounting Treatment for Business Combinations. Journal of Accounting and Public Policy, Vol.9. pp.111-133. Friedlan. J. M. (1994), 'Accounting Choices by Issuers of Initial Public Offerings', Contemporary Accounting Research, Vol.11 (summer), pp. 1-31. Gagnon, J.M. (1967). 'Purchase Versus Pooling-of-interests: The Search for a Predictor',Journal of Accounting Research, pp. 187-204. Gore. P., Taib. F. M. and P. A. Taylor (2000). 'Accounting for Goodwill: An Examination of Factors influencing Management Practices', Accounting and Business Research, Vol.30, (Issue 3), pp. 213-226. Habib, M. A. and A. P. Ljungqvist (2001), 'Underpricing and Entrepreneurial Wealth Losses in IPOs: Theory and Evidence', The Review of Financial studies. Vol. 2 1. NO.2), (Summer), pp. 433-458. Hepworth, S. R. (1953), 'Smoothing Periodic Income', The Accounting Review,(January), pp. 32-39. Hong, H., K. S. Kaplan and G. Mandelker (1978), 'Pooling vs. Purchase: The Effects of Accounting for Mergers on Stock Prices', The Accounting Review, Vol. LIII(I), pp.31-47. Hopkins, P.E., R.W. Houston and M.F.Peters (2000), 'Purchase, Pooling and Equity Analysts' Valuation Judgments', The Accounting Review, Vol.75 (No.3),pp.257-281. Klein, A. (1996), 'Can Investors Use the Prospectus To Price Initial Public Offerings?',Journal of Financial Statement Analysis, (Fall), pp. 23-39. Leone, A. D., S. Rock and M. Willenborg (2003), 'Disclosure of Intended Use of Proceeds and Underpricing in Initial Public Offerings', SSRN Working Paper Series. Malaysian Accounting Standards Board (MASB) 21 (Business Combination's). Malaysian Accounting Standars Boards (MASB) Exposure Draft 28 (Goodwill). Mohan, N and C Chen (2001). Information Content of Lock-Up Provisions in initial Public offerings' International Review of economics and finance, Vol 10, pp 41-59. Neill, J. D., S. G. Pourciau and T. F:. Schaekr (1995), 'Accounting Method Choice and IPO Valuation', Accounting Horizons. Vol. 9, pp. 68-80. Sapienza, S. R. (1967), 'Discussion of Purchase Versus Pooling-of-interests: The Search for a Predictor', Journal of Accounting Research, pp. 205-209. Smart, S.B. and C.J. Zutter (2003), 'Control as a Motivation for Underpricing : A Comparison of Dual-and Single-Class IPOs', Journal of Financial Economics.s, Vol. 69 (No. I), pp. 85-110. Tan, L. 7'. (1992). 'Goodwill and Identifiable Intangible Assets', The Malaysian Accountant, April, pp. 3-10. Vincent, L. (1997), 'Equity Valuation of Purchase Versus Pooling Accounting', Journal of Financial Statement Analysis, Vol. 2 (N0.4). Wan Hussin W. N. (2002), Investor Protection Mechanism and IPO Valuation on the Kuala Lumpur Stock Exchange. SSW Working Paper Series. Watts, R. I,. and Zimmerman, J. (1986), 'Positive Accounting Theory', Prentice Hall, New Jersey. Watts, R. L. and Zimmertnan, J. (1986), 'Positive Accounting Theory: A Ten Year Perspective', The Accounting Review, Vol. 65, (No. 1), (January), pp. 131-156. |