Initial Public Offering (IPO) is stock offering to society for the first time. IPO is one of way that is used by a company to get surplus capital that use for company expansion. In order to attract the investors to invest to the company, manager can report higher profit that said as earning management. The purpose of this research is to investigate earnings management during periods around the Initial Public Offering of a company one year prior to going public and one year after going public. This research also examine financial performance of company after go public.
This research is a replication of research has been done by Maylianawati and Ekawati (2005). Sample of the research consists 24 companies that take place IPO during 2008-2012. Earning management is measure with discretionary accrual from Healy model. The data is collected from Prospektus and yearly financial report of company. One sample t test is used to examine whether significant discretionary accrual among the companies for T-1 and T+1. Paired sample t test and Wilcoxon test is used to examine of degradation of finance performance (Underperformance) after IPO.
The results of research show that company do policy of earnings management with used income-increasing discretionary aacrual one year before IPO and one year after IPO. This research also find that company executing IPO experience of degradation of financial performance after IPO.
Keywords : Earnings management, Discretionary accruals, Initial Public Offering (IPO), Financial performance of company.