Information Uncertainty,Earnings Management,and Long‐run Stock Performance Following Initial Public Offerings

We examine how information uncertainty surrounding IPO (initial public offering) firms influences earnings management and long‐run stock performance. For low‐information‐uncertainty issuers, at‐issue earnings’ management is positively related to subsequent unmanaged earnings and has no relationship to market reaction to earnings announcement and long‐run stock performance following the offering. For high‐information‐uncertainty issuers, however, at‐issue earnings’ management is unrelated to subsequent unmanaged earnings and negatively related to market reaction to earnings announcement and long‐run stock performance following the offer. The evidence suggests that, on average, managers in low‐information‐uncertainty firms tend to engage in earnings’ management for informative purposes, while managers in high‐information‐uncertainty firms engage in earnings’ management for opportunistic purposes.