The Correlation Between IPO Pricing And The Level Of Earnings Management

The process of IPO pricing which is a comprehensive judgment based on the company’s internal and external features where the weight of the internal is more important, reflects the characteristics of the company’s internal differences to some extent. Because of China’s IPO pricing mechanism with PE ratio,PE ratio has become the main performance of the IPO pricing. And to some extent, it reflects the recognition of the extent of the market for corporate governance and pre-IPO earnings quality. Impacted by the company’s internal stability factors, the company’s behavior showes a certain degree of stability and individual differences, it will be reflected in the company’s behavior. For the accounting information disclosure, it will be relatively stable and consistent in earnings management behavior preferences.This article used China’s1367A-share listed companies(from2003to2012, involved6956sample), to study the correlation between the earnings release and after-IPO’s earnings management, and found that after-IPO earnings management behavior and the IPO PE ratio has negative correlation. Further exploring find that the negative contact between earnings management and the IPO PE ratio is relatively weaker in the circumstances of such strong incentives to manage earnings as SEO or maintaining the listing eligibility. The study results demonstrate the before and after IPO showed a consistency of earnings management behavior.From the side, the conclusions of this study show that the IPO pricing system in China, although there were stringent controls, leading to serious IPO underpricing, and to some extent distort the price mechanism. But this pricing still reflect the difference in the level of the different companies on there own characteristics, this difference will still be reflected in the issue of earnings management behavior.