One of the IPO-related anomalies that have been well-discussed in the finance literature is the IPO's long-running underperformance. Two of the major explanations of that phenomenon are: "Hot market" and earnings management. This study investigates the relative importance of these two...

Prior research suggests that the fear of litigation precludes most managers from manipulating earnings in the initial public offering (“IPO”) setting. Yet, managers' restraint is perhaps unwarranted: research has not yet linked instances of aggressive pre-IPO reporting to increased...