Is the Corporate's Earning Quality positively correlated with IPO Initial Return?

This study investigates the influence of earnings quality on IPO Initial return in the Chinese A- share market from 2011 to 2019, categorizing it into primary market underpricing and secondary market overpricing. Earnings quality represents the extent of managerial earnings manipulation to present a favorable financial image. The findings reveal a significant impact of earnings quality on both underpricing and overpricing. Innovations of this paper include: 1) a robust estimation of overpricing and underpricing components using fair stock value calculations, enabling deeper insights into earnings quality impact; and 2) a comprehensive measurement of earnings manipulation by incorporating accrual earnings quality and real earnings management, thus enriching the analysis of "cooking the books" behavior.