
is observed as with the modified Jones model. Whatever the analysis period, abnormal
returns are monotonically more negative for more aggressive terciles. Moreover, once
again negative abnormal returns are statistically significant exclusively for the third
aggressive tercile.
Alternatively, we can investigate the relation between previous earnings manage-
ment and post-IPO stock returns employing the calendar-time approach. As we
explained in section 7.3, this procedure analyzes the offering firms’ returns over the
1-, 2-, and 3-year post-IPO period by examining the strategy of holding a portfolio
which is made up, in each calendar month, of the stocks ...