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Title: Earnings management in Initial Public Offerings (IPOs) of U.S. REITs
Keywords: Real Estate, Earnings Management, REIT, IPO
Issue Date: 8-Jun-2009
Citation: SHEN HUAISHENG (2009-06-08). Earnings management in Initial Public Offerings (IPOs) of U.S. REITs. ScholarBank@NUS Repository.
Abstract: Hartzell et al (2005)* indicate that demand and supply of properties are major forces driving REIT market cycles. Firms raise capital in accordance to their needs. However, firms tend to raise more than needed in any fund raising exercise. Do Real Estate Investment Trusts (REITs) inflate their earning in their initial public offerings (IPOs)? Based on financial data of more than 200 REITs, this thesis tests the hypothesis of whether REITs distort their accounting earning performance to support their equity fund raising exercises. The study shows that REITs have excessively high discretionary accruals in IPO year, but these accruals decline in the following years. The change in ROA can be efficiently predicted by the IPO year abnormal accruals. In the hot market, earnings management is more aggressive. REIT IPOs in the hot markets are more opportunistic, they are more likely to exploit the earnings management in their IPO exercises. * Hartzell, Jay C., Jarl G. Kallberg, and Crocker H. Liu, 2005, The Role of the Underlying Real Asset Market in REIT IPOs, Real Estate Economics} 33, 27-50.
Appears in Collections:Master's Theses (Open)

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