DANCEST 805 Lecture Notes - Lecture 10: Underwriting, Institutional Investor, Abnormal Return
The dynamics of financial reporting credibility: evidence from ipos article by moers, peek and vorst. This study examines the development over time of financial reporting credibility, measured as investor-perceived earnings relevance, during the initial years after a firm has gone public. Analyzing a sample of 3,468 us initial public offerings (ipos) between 1980 and 2009, we find that the cross sectional variation and intertemporal stability of perceived earnings relevance increases during the first five years following the ipo. Further, we find that firm- specific post- ipo trends in earnings relevance correlate with variables that were known to investors around or shortly after the ipo, such as measures of underwriter quality and the initial level of earnings relevance. As such, these findings illustrate that firms need time to acquire their financial reporting reputation. In a subsequent analysis we explore the mechanisms that contribute to the development of ipo firms" financial reporting reputation.