The Relationship between Financial Risk and Earnings Management Before and After IPOs: Evidence from Thailand and Singapore

Teerachai  Arunruangsirilert; Wattanachai  Sangsuwan

doi:10.70730/tureview.v29i1.241507

Authors

Teerachai Arunruangsirilert Thammasat Business School, Thammasat University, Thailand
Wattanachai Sangsuwan Thammasat Business School, Thammasat University, Thailand

DOI:

https://doi.org/10.70730/tureview.v29i1.241507

Keywords:

Financial Risk, Real and Accrual Earnings Management, Initial Public Offering

Abstract

This study examines the relationship of financial risk and earnings management in firms undertaking initial public offerings (IPOs) in Thailand and Singapore between 2010 and 2019, a period spanning between the H1N1 and COVID-19 pandemics. Financial risk is categorized into three types: credit risk, liquidity risk, and operational risk. The analysis utilizes structural equation modeling, comprising 622 firm-year observations across four periods: one year before the IPO (T-1), the IPO year (T), one year after the IPO (T+1), and two years after the IPO (T+2). The findings indicate that IPOs have no direct effect on earnings management in any period for either country. However, an indirect effect is observed for Singapore at T-1, where IPOs are associated with increased accrual-based earnings management mediated by credit risk. No indirect effect is found for Thailand across the four periods.

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