La dimensión de infraestructura general

The third empirical research question of this thesis (chapter seven) examines the association between IPO failure and real and accrual earnings management. Following prior research (e.g., Li and Zhou, 2006; Demers and Joos, 2007) IPO failure is defined as those IPO firms who delisted from the stock exchanges for negative reasons within five years post the IPO date. The negative reasons (involuntary delisted) are, administration, receivership, liquidation, winding up, and bankruptcy. Delisted reasons and dates of delisting are collected form Fame and

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were double checked with delisted dates that are obtained from the DataStream. In addition, the delisted reasons from Fame were cross checked with the delisted reasons obtained from Companies House (ICC Plum).

Out of 571 non-financial IPO firms that went public on either the Main or AIM markets between January 1998 and December 2008 (with available prospectuses and the necessary data to analyze real and accrual earnings management), 317 IPOs are delisted and 253 IPOs survive prior to December 2011. Specifically, 90 IPOs are delisted for negative reasons (administration, receivership, liquidation, winding up, and bankruptcy), 140 IPOs are delisted as a result of being acquired by other firms, 68 IPOs are delisted at the request of the company, and 19 IPOs are delisted for other reasons. After imposing the definition of IPO failure (delisted for negative reasons within 5 years after the IPO date), 60 IPOs out of 90 IPOs are found to be delisted for negative reasons within 5 years after the IPO date. Thus, the final sample consists of 60 IPOs delisted for negative reasons and 253 IPO survivors prior to December 2011.

Table 4.9 presents a breakdown of 317 delisted IPOs by reasons for delisting. Table 4.9 shows that 28.39% (90 IPOs) are delisted for negative reasons out of the total delisted IPOs (317 IPOs), 44.16% are delisted for being acquired (takeover) by other firms, 21.46% are delisted at the request of the company, and 5.99% are delisted for other reasons. While after imposing the five-year restriction Table 4.9 shows that 36.58% (60 IPOs) are delisted for negative reasons out of the total delisted IPOs within five year (164 IPOs).

Table 4.9 Data on reasons for the cancellation (delisting) of 317 IPOs between January 1998 and December 2011

Since the IPO date and up to December 2011

Since the IPO date and up to 5 years after the IPO date

Delisted reasons Number Percentage (%) Number Percentage (%)

Negative reasons 90 28.39 60 36.58

Takeover (being acquired) 140 44.16 72 43.90

At the request of the company

68 21.46 51 31.09

Other reasons 19 5.99 11 6.71

Total delisted IPOs 317 100.00 164 100.00

Table 4.9 reportsthe distribution and reasons for the cancellation (delisting) of 317 IPOs between January 1998 and December 2011.

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Table 4.10 (Panels A and B) present descriptive statistics for IPOs delisted for negative reasons within five years after the IPO date and survivor IPOs. Panel A shows that the mean (median) market capitalization for IPO firms delisted for negative reasons is £33.34 million (£18.26 million), while Panel B shows that the mean (median) market capitalization for IPO survivors is £140.80 million (£26.12 million). This large difference in market values between the two samples suggests that small IPO firms exhibit a higher probability of delisting from the stock exchange in the following periods. In addition, Table 4.10 shows that IPO firms delisted for negative reasons experience operating losses during the IPO year compared with IPO survivors. Specifically, Table 4.10 (Panel A) shows that the average net income of IPO firms delisted for negative reasons at the IPO is £-0.54 million, the median is £-0.32 million, the standard deviation is £3.78 million, the minimum amount is £-11.84 million, and the maximum amount is £16.19 million. While for IPO survivors Table 4.10 (Panel B) shows that the mean (median) net income is £4.51 million (£0.01 million) with a minimum amount of £-124.10 million and a maximum amount of £397.47 million.

Table 4.11 (Panel A) reports the time distribution of IPOs delisted for negative reasons and IPO survivors over the period from 1998 to 2008. For IPOs delisted for negative reasons Table 4.11(Panel A) shows that more than 60% of the sample are delisted during the years 2000, 2004 and 2005, while the majority of other years show similar percentages range from 1% to 11%. Table 4.11 (Panel B) presents the frequency of IPOs relative to the industry standard classification, measured by 2-digit SIC code. For IPO firms delisted for negative reasons Table 4.11 (Panel B) shows that the maximum number (highest percentage) of delisted IPOs in a single industry, 2-digits SIC, is 19 IPOs (31.67%) in Business Services industry, while other industries have similar frequencies of delisted IPOs ranging from 1 IPO (1.67%) to 7 IPOs (11.67%).

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Table 4.10 Descriptive statistics for sample IPO firms during 1998-2008 by IPO failure

Total assets Net income Market value Money raised

(£ mill.) (£ mill.) (£ mill.) (£ mill.)

Panel A: IPO delisted for negative reasons (n=60)

Mean 7.75 -0.54 33.34 10.45

Median 2.58 -0.32 18.26 4.70

Std. dev 13.84 3.78 41.78 13.91

Minimum 0.12 -11.84 1.44 0.25

Maximum 75.18 16.19 193.04 55.00

Panel B: IPO survivors (n=253)

Mean 78.45 4.51 140.80 60.86

Median 4.11 0.01 26.12 6.64

Std. dev 284.31 33.98 349.29 184.76

Minimum 0.07 -124.10 1.44 0.14

Maximum 1969.10 397.47 2020.68 1499.85

Table 4.10 presents sample descriptive statistics for IPO firms delisted for negative reasons and survivor IPO firms. All variables are previously defined.

Table 4.11 Time and industry distribution of IPOs during 1998-2008 by IPO failure

Panel A: Time distributions

Delisted for negative reasons within

5 years post IPO Survivors

Year Freq % Freq %

1998 4 6.67 8 3.16 1999 3 5.00 6 2.37 2000 13 21.67 29 11.46 2001 2 3.33 19 7.51 2002 1 1.67 19 7.51 2003 3 5.00 8 3.16 2004 12 20.00 47 18.58 2005 15 25.00 42 16.60 2006 7 11.67 42 16.60 2007 - - 31 12.25 2008 - - 2 0.79 Total 60 100.00 253 100.00

Panel B: Industry distributions

Table 4.11 reports time and industry distributions for IPOs delisted for negative reasons and survivor IPO firms. Delisted for negative reasons within

5 years post IPO Survivors

Industry 2-digit SIC Freq % Freq %

Oil and gas extraction 13 2 3.33 17 6.72

Food products 20 1 1.67 4 1.58

Printing and publishing 27 1 1.67 6 2.37

Chemicals and allied products 28 5 8.33 16 6.32

Industrial machinery 35 2 3.33 6 2.37

Electronic equipment 36 6 10.00 19 7.51

Instruments and related products 38 2 3.33 9 3.56

Communications 48 1 1.67 12 4.74

Electric, gas, and sanitation 49 1 1.67 5 1.98

Durable goods 50 - - 2 0.79

Eating and drinking establishments 58 3 5.00 5 1.98

Retail 59 - - 3 1.19

Business services 73 19 31.67 76 30.04

Media and entertainment 78 1 1.67 5 1.98

Amusement and recreation 79 7 11.67 8 3.16

Engineering and management services 87 1 1.67 28 11.07

All others - 8 13.36 32 12.64

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4.4 The Estimation of Real Activities and Discretionary