I . Introduction
This study is to examine the impact of aggressive earnings management in the before, during, and after period of initial offerings ‘IPO’) public (hereafter, on mandatory delisting firms listed in Korean Securities  Dealers'  Automated  Quotation (hereafter, ‘KOSDAQ’). Because firms can be benefited through IPO such as raising funds, enlarging stock price and reducing tax burdens, it’s national that managers should have an incentive for Some researchers, however, have IPO. documented that IPOs have been associated with more earnings management to meet a necessary condition for the firm operating performances required by authorities (Teoh, Welch and Wong 1998; Kim et al. 2004; Kyoko and Toyohiko, 2007; Ball and Shivakumar, 2008). KOSDAQ firms have more incentives for earnings management under the existing conditions of less tight financial disclosure system than Korea composite Stock Price Index (KOSPI) in Korea Exchange (KRX). However, if f firms could not recover their transiently enhancing earnings toward an intrinsic qualities, they would be faced with danger of insolvency    resulted from cumulative loss. Moreover, in the case of KOSDAQ, there has been frequent examples that owners, managers and block-holders tend to commit moral hazards such as embezzlement or breach of trust, so it is necessary that ethical contemplation of delisting should be traced back to the IPO period on the financial reporting point of view, especially earnings management. This study sets up a hypothesis that there is a positive relation between earnings management and delisting of IPO firms in KOSDAQ. To analyze this hypothesis, this study collects firms-year data on IPO firms. All the samples of IPOs are 910, which are consist of 670 listing and 240 delisting (DEL),  selected companies from the KOSDAQ in the year 2000～2013. Earnings is    proxied signed management by discretionary accruals (DA) estimated using a cross-sectional version of Kothari, Leone, Wasley (2005), representing the direction of earnings management. This is why firms opportunistically may exercise or strategically earnings enhancement around IPO. Main findings are simple and clear. In the case of IPO in KOSDAQ firms, the more they practice earnings management to exceed thresholds, the higher they meet danger of delisting. This means the degree of earnings management in the IPOs should impair with the quality of IPO, while the bad accounting quality of IPO is inversely related to future delisting risk. This study connects the four factors of on KOSDAQ  market, IPOs, literature earnings delisting management   and possibilities. This study will contribute to presenting the basis of an argument to work out a scheme for policies and improving accounting transparency in IPO firms. Also, these results can be useful for the users of accounting in getting a line on delisting to minimize the potential losses with regard to earnings stabilities in IPO firms.
II . Literature Review and
Hypothesis Development
Several studies have found evidence of earnings management surrounding an IPO, and the main   reason of earnings management is related to raising capital funds. Teoh, Welch, and Wong (1998), Teoh, Wong, and Rao (1998), and Erickson and Wang (1999) report that enhanced earnings prior to IPOs would related to seasoned equity offers and stock financed acquisitions. Teoh, Wong, and Rao (1998) also provide evidence  of  a  subsequent  reversal  of unexpected accruals following IPOs and stock financed acquisitions. Healy and Wahlen (1999) conclude that some managers inflate reported earnings before public equity offers in  order  to  influence  investors' expectations of future performance and the offer    price. Ball increase and Shivakumar (2008), however, show that the evidence reported by Teoh, Welch and Wong (1998) is unreliable for a variety of reasons, providing cleaner evidence, from samples of U.K. and U.S. IPO firms, which are conservative by several financial standards. Li and Zhou (2006) find that IPOs associated with aggressive earnings management are more likely to delist for performance failure, and tend to delist sooner. Furthermore, they with show that  IPO  firms  associated conservative earnings management are more likely to be merged or acquired and they earn positive abnormal returns. Likewise, Kyoko and Toyohiko (2007) investigate whether the extent of earnings management has any impact on offer price in IPOs. Using a sample of 581 JASDAQ IPO firms, they find that offer price reflects earnings management to some extent. Firms with conservative earnings management tend to have higher offer prices, and firms managing earnings aggressively tend to be discounted when they fail to exhibit smooth earnings growth. Yoon (2001) report that the KOSDAQ firms, as compared to the KRX (former days KSE, nowadays KOSPI) firms, increase accruals more heavily when operating cash flows are poor and decrease accruals more when operating cash flows are high. In other words, the KOSDAQ firms more aggressively employ income-smoothing strategies than the KSE firms do. Lee, Park and Kim (2005) the  earnings  management make clear behavior of KOSDAQ IPO firms. The major findings of empirical tests are motivated at earnings management in newly going public by two reasons, raising the offering prices and satisfying qualifications in pre-going publics. Choi, Kwak and Baek (2010) also find that in spite of rapid expansion of the market in terms of capitalization, KOSDAQ firms mislead to frequent moral hazards such as embezzlement around IPOs. The result suggests that the privately-held companies incentives  to have  stronger manage earnings upward around their IPO time in the KOSDAQ market relative to their counterparts in the KRX, and/or the mechanism monitoring and checking exercised by underwriters and external auditors in the KOSDAQ might not be as effective as in the KRX market. Shon and Yum (2013) revealed that firms with a higher propensity of being delisted tend to manipulate earnings to avoid the delisting. Especially, they also find out that firms with a high risk of delisting tend to use real earnings management while accrual manipulation is more likely to be caught. In (2014) that addition to, Kim shows opportunistic block-holders dispose of their ownership using the inside information to pass their bad condition to the naive investors. is Earnings managers management opportunistic or strategic decision itself, but the fundamentals of the issuing firm may related to the delisting risk. If IPO firms be recovered earnings from cannot management toward positive performances in the long term, the issuing firms tend to have detrimental impact on shareholders, faced   with enforced and they are withdrawing from the market. This means the degree of earnings management in the IPOs should impair with the true value of a firm, while the bad accounting quality of IPO is inversely related to future delisting risk, especially KOSDAQ. This study is to analyze the probability of compulsory delisting caused by earnings management around IPO, and the hypothesis is developed as: Hypothesis: KOSDAQ Firms associated with upward earnings management in the IPO around are more likely to be compulsory delisted from the market.
III. Research Design
Earnings  management  is  proxied by discretionary accruals (DA). DA represents the direction of earnings management. Since our hypothesis does not rely on the magnitude of the accrual adjustments, but the direction of accrual, test statistics are based on the signed value of the abnormal accrual (Warfield, Wild, and Wild, 1995). This is the reason why IPO issuers may adjust their earnings to enhance raising the offering prices and going public. Discretionary accruals are estimated using a cross-sectional version of Kothari, Leone, Wasley (2005), and as the following
where TA is total accruals (net income minus cash flow from operations), At-1 is beginning total assets, AREV is the change in sales revenues, AREC is the change in accounts receivable, PPE is property, plant and equipment, and performance matching variables (ROA) are included. Subscript i and t is a firm for any time and α 0,1,2,3 is an
coefficient, estimated respectively. other  studies, Consistent with DA is assumed to be the outcome of managers' opportunistic choices of accounting decisions. To test the hypothesis, the following regression models are specified:
DA: signed discretionary accruals estimated by Kothari et al.(2005) model, SIZE: the natural logarithm of total assets, DEBT: total liabilities to total assets, LONG: the natural logarithm of listing days, BIG: audit dummy, IPOs aligned with a foreign big audit company 1, otherwise 0, BLOK: the ratios of block-holders' ownership, FOR: the ratios of foreigners' ownership, SCOR: KIS VALUE credit scores measured by NICE INFORMATION SERVICE This the logistic  probit is analyses conducted to test the hypothesis. All the variables are designed at the time IPOt-1, IPO t, and IPO t+1 . Main explanatory variables are DA, and the other control variables on the right-hand side of equation (2) are adopted by previous studies on delisting. To analyze this hypothesis, this study collects firms-year data on IPO firms. All the samples of IPO are 910, which are consist of 670 listing and 240 delisting companies (DEL) that contain 51 firms delisted by substantial investigation of compulsory or regulatory system for deteriorating disclosure qualities, selected from the KOSDAQ in the year 2000～2013(1)

IV. Empirical Results
4.1 Descriptive Statistics
Table 2 shows the descriptive statistics for the major research variables. Mean values of DA are near 0, and run getting higher gradually from IPO t-1 to IPO t+1. The mean of SIZE is getting bigger after IPO, and DEBT is elastic with the current of the times for IPO. LONG is, 605 calculated in terms of days. BIG shows IPO issuers are audited by big4 auditors. BLOK grows higher but lower, and foreign investors gradually extend their investment and ownership. But credit evaluation runs lower, suggesting that IPOs may fail to recover their intrinsic value.
SIZE: the natural logarithm of total assets, DEBT: total liabilities to total assets, LONG: the natural logarithm of listing days, BIG: audit dummy, IPOs aligned with a foreign big audit company 1, otherwise 0, BLOK: the ratios of block-holders' ownership, FOR: the ratios of foreigners' ownership, SCOR: KIS VALUE credit scores measured by NICE INFORMATION SERVICE
4.2 Correlation and Mean-
Difference Analysis
Table 3 correlation shows Pearson coefficients between delisting (DEL) and the proxy of earnings management (DA) around IPO. The most noticeable point is that DEL is positively correlated to DA at the 1% significant level all the just pre or post IPO time. Table 4 examines the mean difference between two different groups of 670 listing and 240 delisting companies (DEL). The DA of DEL-group means for all the time are higher that of LISTING with statistical significance. All the above results show the probabilities that earnings increasing management in the pre, just then or post IPO time will lead to the delisting.
DEL: only 1 delisted IPOs within the year 2000-2013 after 2000 IPOs, DA: signed discretionary accruals estimated by Kothari et al.(2005) model, SIZE: the natural logarithm of total assets, DEBT: total liabilities to total assets, LONG: the natural logarithm of listing days, BIG: if a firm would be aligned with a foreign big audit company 1, otherwise 0, BLOK: the ratios of block-holders' ownership, FOR: the ratios of foreigners' ownership, SCOR: KIS VALUE credit scores measured by NICE INFORMATION SERVICE *All the cells are coefficients (above) and p value (below) for two-tailed tests.
Panel B. IPO year t
Aggressive Earnings Management around IPOs and Involuntary Delisting in KOSDAQ
LISTING: continued firms after 2000 IPOs The definition of other variables is the same as the above Table 2 and Table3. ***, and ** indicate that the means are significantly different at <.01 and <.05 levels for two tailed tests.
4.3 Results of Logistic Regression
Analysis
Table 5 is the result of possibilities of upward delisting owing to earnings management around IPO on delisting after controlling other variables. The of coefficients of DA are 2.45, 1.42, and 1.09, indicating earnings management to exceed thresholds affects delisting with statistical significance in the time around IPO. But with the current of the three diverse time, effects of earnings enhancing the management on delisting are all different, and weakly fallen. This implies that the managers in IPO firms are involved in opportunistic financial reporting to meet the for going requirements public, in consequence, IPO firms' aggressive earnings management will likely be avoided by capital market. This results suggest that the finance or invest   authorities should strengthen the regulations from the IPO in order to protect market participants.
Test model: D E L Bn + B1DA + B2SIZE+ B3DEBT+ B4LONG X + β7FOR+ β8 SO DEL: only 1 delisted IPOs within the year 2000-2013 after 2000 IPOs, DA: signed discretionary accruals estimated by Kothari et al.(2005) model, SIZE: the natural logarithm of total assets, DEBT: total liabilities to total assets, LONG: the natural logarithm of listing days, BIG: if a firm would be aligned with a foreign big audit company 1, otherwise 0, BLOK: the ratios of block-holders' ownership, FOR: the ratios of foreigners' ownership, SCOR: KIS VALUE credit scores measured by NICE INFORMATION SERVICE ***, ** and * is significant level at the 1%, 5% and 10% respectively (two-tailed). Table 6 is the result of replacement DA DAJ, the alternative measures of with modified Jones model (Dechow, Sloan, and Sweeney, 1995). The results of the logistic regressions are consistent with the reported results. These results show that various measures of earnings management are positively related to involuntary delisting possibilities.
DAJ: signed discretionary accruals estimated by modified Jones model (1995)
V . Conclusion
IPO firms are given the various favors, and this may act on the earnings enhancing management to or obtain   opportunistic strategic gain through IPO. The degree of excessive earnings management, however, impair intrinsic firms' and may value decrease with real performance qualities. This study hypothesize that the degree of upward earnings management in the IPO process is positively related to the delisting. Empirical results strongly are supported significantly. Concretely, the main results of this study can be summarized as follows: Firstly, an analysis on the correlation shows that DA at t-1, t and t+1 of IPO period have a strongly positive relation to DEL in KOSDAQ firms. Secondly, in the two-sample independent t-test, DA of DEL group are significantly higher than those of listing firms. Finally, the results of multiple logistic regression model containing control variables show that DA at t-1, t, and t+1 of IPO period have a significantly positive effect on DEL in KOSDAQ firms. Futhermore, findings of additional analysis using DA estimated by the modified Jones model (Dechow et al., 1995) are robustly consistent with main results. This results will contribute much to the prediction of IPO failure through earnings the management and emphasize fundamentals IPO firms related of to delisting risk.
Notes
(1) Substantial Investigation System of Delisting executed from 2009 by is Substantial Investigation Committee in order to improve the health of the market and restore market confidence.