IPO issue does not play accounting policy

Sun Xudong/Wen Previous studies have pointed out that there are widespread earnings management practices in Chinese listed companies before they are issued, which has led to a decline in market earnings pricing and long-term performance. Haoping Xu and Chen, a two scholar at Fudan University, studied the accounting earnings quality of the IPO companies in 2002 and 2005 *. To measure the earnings quality with controllable accrual profit, the conclusion is different from the previous research: there is no evidence that IPO companies have significant earnings management behavior in general. However, the quality of enterprises with higher filial piety growth and in the non-protective industry is poor, for these companies, regardless of the level of the market or the two-tier market can be based on earnings quality factors significantly lower the value of the company's earnings, making the issue price and market prices are not misled by earnings management.　　In addition, the authors also found that the decline in long-term performance after the issuance of new shares could not be attributed to the erroneous pricing of the inferior earnings quality before issuance. Accounting surplus consists of cash flow and accrual profit, which is based on accrual basis, which is the key of modern accounting system, which differs from the original value measurement method based on cash receipts and payments. The paper uses most of the research practice to define the accounting earnings quality as the quality of accrual profit, and to measure the accrual profit quality with the controllable accrual profit. The controllable accrual profit is the part that can not be explained by the enterprise economic variable in accrual profit, the higher the accrual profit, the lower the quality of accrual and accounting surplus.　　Comment on: The quality of IPO company has always been the focus of market attention, the research results show that with the deepening of China's securities market reform, the external supervision and internal governance of listed companies can restrain the opportunistic behavior in the issue to some extent, improve the protection to investors and maintain the market order, which is obviously inspiring. However, if the quality of the IPO company (even if only the quality of accounting information) is very high, it is too optimistic. In fact, the earnings management behavior discussed in the article is not the biggest damage to investors.　　The author used to measure the accounting earnings quality is the controllable profit index, the basis of this method is still in comparing accrual profit and operating cash flow, and assuming cash flow is objective fact, and IPO company changes accrual profit through accounting policy and accounting estimate, thus beautify its profitability. However, the reality is brutal, some of the issues listed or intended to be listed companies are far more serious than playing a game of accounting policy and accounting estimates. As early as the June 2004 listed St Joan Flower (002002), only one months after the listing of the fraud scandal, the SFC pointed out that its prospectus disclosed in the Treasury bond investment situation is seriously inconsistent with the facts; recent such as Li Li Electronics, allegedly hollowed out listed companies St Haina (000925), The IPO was eventually withdrawn by the SFC. In addition, financial analysis expert Charlot in 2008 also accused 10 of medium-sized and large companies suspected of theft of fraud listed, at that time caused a great impact. Whether the 10 companies are really problematic is inconclusive, but the North Sea Country (600538), which was listed in early 2003, was onWhen the city was Charlot strongly questioned, after the listing of the results of the downturn is the fact that the Ministry of Finance documents to prove that there is a false increase in profits, conceal the debt behavior. Cash flow and cash are once considered real, hard to fake data, and today, cash-fake listed companies are not uncommon.　　Compared to this, scholars are still status quo, to manipulate accrual profit as the main weapon to measure the quality of accounting earnings, to while, outsmart feeling, how many are powerless it!　　From this point of view, the summer grass struggle is very meaningful, he is trying to find some of the IPO company's disturbing characteristics, indirectly to improve the quality of the IPO company to make a contribution. * The article is the "Accounting earnings quality, new stock pricing and long-term performance-from the Chinese distribution system reform IPO market evidence," see China Financial academic research network.