Jurnal Akuntansi.., Vol 11, No 3 (2007)

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Nurainun Bangun, . Rita


This research examines whether issuers of Initial Public Offerings (IPO) select accounting methods by making income increasing discretionary accruals in the periods prior to the offering. Issuers are well motivated to increase the reported earnings given two potential reason. First, the absence of market price information prior to the offering has made it difficult for parties involved in the new issuer market, i.e., underwriter, issuers and potential investor, to price the offering rationally. Second, this condition, together with the widely accepted argument that earnings performance has been the target of stock valuation for most investors in the capital market, may provide opportunity and motivation for the issuers the effect the firm’s reported earnings. Tests were conducted on 46 IPO firms that go public during the period 2001-2005 at the Jakarta Stock Exchange. The method used to examine earnings management follows the one developed by Friedlan (1994) as has been tested in the US’IPOs. Friedlan use total accruals as proxy to account for the data limitation and specific characteristics of an IPO setting. The result of 46 IPO firms that go public during the periods 2001-2005 show that accruals management is found in the period of one year prior to the offering and for the period of IPO. There are an assets and sales growth different which is significant at the time of IPO and 1 year before IPO from 46 IPO firm.


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