{"title":"The economic consequences of IPO sales growth management: Evidence from ChiNext-listed companies in China","authors":"Ning Hu, Wan Huang, Ying Liu, Limin Zhang","doi":"10.1111/jbfa.12746","DOIUrl":null,"url":null,"abstract":"<p>Based on a sample of Chinese ChiNext (Growth Enterprise Market) firms during their initial public offerings (IPOs) from 2009 to 2019, this study explores whether these firms engage in sales growth management and examines its economic consequences. We provide evidence that ChiNext firms tend to manage their sales growth to influence issuance prices during IPOs. Further, the study identifies several indicators that suggest growth-managing firms engage in more aggressive and riskier promotional strategies, such as longer turnover days of receivables, lower gross profit margins and higher allowance ratios for doubtful accounts. The study also finds that growth-managing firms are more likely to have higher price-to-earnings ratios, offer prices, overfund ratios, first-day closing prices and a higher percentage of positive posts, suggesting that these firms aim to inflate their growth to attract more funds from financial markets by influencing investors' expectations. Additionally, we find a negative relationship between sales management and post-IPO stock returns, indicating that investors cannot effectively identify sales management by ChiNext IPO firms. Cross-sectional analysis also shows that growth-managing ChiNext IPO firms are likely to have depressed post-IPO performance, whereas the market intermediary (brokers, auditors and asset appraisal institutions) with a good reputation helps to alleviate future performance reversals.</p>","PeriodicalId":48106,"journal":{"name":"Journal of Business Finance & Accounting","volume":"51 5-6","pages":"1217-1250"},"PeriodicalIF":2.2000,"publicationDate":"2023-09-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Business Finance & Accounting","FirstCategoryId":"91","ListUrlMain":"https://onlinelibrary.wiley.com/doi/10.1111/jbfa.12746","RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
Based on a sample of Chinese ChiNext (Growth Enterprise Market) firms during their initial public offerings (IPOs) from 2009 to 2019, this study explores whether these firms engage in sales growth management and examines its economic consequences. We provide evidence that ChiNext firms tend to manage their sales growth to influence issuance prices during IPOs. Further, the study identifies several indicators that suggest growth-managing firms engage in more aggressive and riskier promotional strategies, such as longer turnover days of receivables, lower gross profit margins and higher allowance ratios for doubtful accounts. The study also finds that growth-managing firms are more likely to have higher price-to-earnings ratios, offer prices, overfund ratios, first-day closing prices and a higher percentage of positive posts, suggesting that these firms aim to inflate their growth to attract more funds from financial markets by influencing investors' expectations. Additionally, we find a negative relationship between sales management and post-IPO stock returns, indicating that investors cannot effectively identify sales management by ChiNext IPO firms. Cross-sectional analysis also shows that growth-managing ChiNext IPO firms are likely to have depressed post-IPO performance, whereas the market intermediary (brokers, auditors and asset appraisal institutions) with a good reputation helps to alleviate future performance reversals.
期刊介绍：
Journal of Business Finance and Accounting exists to publish high quality research papers in accounting, corporate finance, corporate governance and their interfaces. The interfaces are relevant in many areas such as financial reporting and communication, valuation, financial performance measurement and managerial reward and control structures. A feature of JBFA is that it recognises that informational problems are pervasive in financial markets and business organisations, and that accounting plays an important role in resolving such problems. JBFA welcomes both theoretical and empirical contributions. Nonetheless, theoretical papers should yield novel testable implications, and empirical papers should be theoretically well-motivated. The Editors view accounting and finance as being closely related to economics and, as a consequence, papers submitted will often have theoretical motivations that are grounded in economics. JBFA, however, also seeks papers that complement economics-based theorising with theoretical developments originating in other social science disciplines or traditions. While many papers in JBFA use econometric or related empirical methods, the Editors also welcome contributions that use other empirical research methods. Although the scope of JBFA is broad, it is not a suitable outlet for highly abstract mathematical papers, or empirical papers with inadequate theoretical motivation. Also, papers that study asset pricing, or the operations of financial markets, should have direct implications for one or more of preparers, regulators, users of financial statements, and corporate financial decision makers, or at least should have implications for the development of future research relevant to such users.
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