Earnings Management and IPOs: Differences between Industries

Earnings management is the techniques of financial information adjustments to enhance attractiveness of a company for investors. Mostly, these methods are complied either with Generally Accepted Accounting Principles or with International Financial Reporting Standards. It is the problem for today’s accounting science because it influences investors, companies and stakeholders. Moreover, this concept is exceptionally complicated to measure. Due to the fact that financial reports reflect the most important financial performance, almost each investor would evaluate the company according to it. Therefore, they could be misled by the companies. The first part of the research is devoted to the problem of measuring such concept, the second is the try to compare industry-based differences of usage such techniques within an IPO process. The fact is that investors have different revenue growth expectations of companies which go public, they differ from industry to industry. According to these expectations, there were chosen two industries for comparison: with high expectation rate and with moderate one. The purpose of the study is to compare companies in two industries which went public with those which did not according to their usage of earnings management.