
to trigger lawsuits against the firm and its management. Thus, if IPO firms decide to
manage earnings, it is highly probable that they manage their first public financial
statement.
In the next section, to measure the long-run market reaction to initial public offer-
ings, as in all event studies, we analyze abnormal returns in a particular period (in
our case a 3-year period) beginning on the event day – that is, the IPO date. In this
way, we acquire knowledge of the stock return performance from the start of the pub-
lic offering.
However, to allow investors in the market to implement a strategy based on the
accrual information, this information should ...