Abstract :
Stock Exchange is the place where company can get the financing by
issued stock and debt. The company that need money in large amount or want to
expand their company can do Initial Public Offering (IPO) in stock exchange. In
order to make the investors interested with company's offering their increasing
their net income by using discretionary accrual account especially from
allowance for loan and losses. So that, they can get money in large amount to
fulfill their needed.
This Paper examines whether issuers of Initial Public Offerings from
banking industry select accounting methods by making income increasing
discretionary accruals in the2 years periods prior and 2 years periods after
offering. Test were conducted on 30 banks which listing in Indonesia Stock
Exchange. The methods used to examine earnings management follows on the
develop by Beaver and Engel (1996) and Friedlan (1994) . The method used the
discretionary accrual for loan losses to detect earning management. If
discretionary allowance is positive, it is indicated do earning management.
The result show that banks in Indonesia Stock Exchange do earning
management one year before Initial Public Offerings. Some bank do earning
management after Initial Public Offering and another banks do earning
management both prior and after Initial Public Offering.