EARNINGS MANAGEMENT IN INITIAL PUBLIC OFFERINGS (IPOS) AND SUBSEQUENT STOCK PERFORMANCE

1) Financial Results Management in Initial Public Offerings (IPOs) and Subsequent Performance of Shares 2) Objective of the Study: The aim of this research was to verify if the Brazilian companies that recently performed IPOs on the Stock Exchange managed their results, improving them in the periods near the launch and, consequently, presented a poor performance in the long term, due to reversals of accounting accruals related to management. 3) Methodology / approach: A positive / quantitative research approach was used, having as main technique the estimation and analysis of the regression models proposed by Kothari, Leone and Wasley (2005) and the Dechow, Sloan and Sweeney (1995) to evaluate the possibility that companies may be managing their accounting results prior to IPOs. 4) Originality / Relevance: The Analysis implemented here is relevant because it aims to clarify for capital market investors whether firms tend to manage their results in order to obtain better stock prices, benefiting from a market failure linked to informational asymmetry between its (better informed) managers and potential investors, with worse information about the company. 5) Main Results: 92 IPOs occurred in Brazil were evaluated. As for the performance metrics analyzed, it could be inferred that managers apparently have been managing firms' results in order to improve these indicators in the moments prior to the launch of actions aiming at a positive market reaction. Finally, it was also observed that, for all subsequent periods analyzed (years +1, +2 and +3), the average return on IPO companies with lower levels of discretionary accruals were higher than the average return presented by IPO companies with higher levels of discretionary accruals. 6) Theoretical / Methodological Contributions: The work may show a better fit of the Kothari, Leone and Wasley (2005) Performance Matching model compared to the traditional model of analysis from Dechow, Sloan and Sweeney (1995) for estimation and identification of earnings management practice in firms.