Sun Hyuk Kim, Su-In Kim
We investigate a manger’s incentive to hide unfavorable information regarding IPO firms with text analysis. A manager has incentives to hide negative information and to increase reported earnings for maintenance of stock price. The results show that difficulty in reading registration statements from IPO firms is related to earnings management in the IPO year and the moderating effects of possibility of replacement of the largest shareholders. This study expands the preceding studies by directly measuring the incentive of management in IPO firms using text analysis. It suggests that investors of IPO firms must consider the manager's narratives for investment decisions.