At the time of the IPO, the prospectus is the only source of information for
investors. The lack of information available will encourage and motivate the
manager of the company to perform the earnings management. After the IPO,
asymmetric information between management and investors is no longer high.
Investors already have a lot of information about the company. Management no
longer has the opportunity to manipulate the financial statements for personal gain.
The objectives of this research are to examine whether companies do the earnings
management in period around the IPO and whether earnings management affects
long-term performance of stock. Therefore, this research goal’s is to find out
whether there is or not earnings management around the IPO in the companies
which do the IPO and its affects to the performance of stock after IPO.
Results show that earnings management happens in period 2 years and one
year before IPO, and also 2 years after the IPO, while in the period around IPO
and one year after IPO, earnings management is not found. Another results found
that earnings management has no effect toward long-term stocks’ performance