Prague Economic Papers 2016, 25(1):112-124 | DOI: 10.18267/j.pep.540

Company Profitability Before and After IPO. Is it a Windows Dressing or Equity Dilution Effect?

Radosław Pastusiak1, Monika Bolek2, Maciej Malaczewski3, Marta Kacprzyk4
1 Faculty of Economics and Sociology, University of Lodz, Lodz, Poland (rpastusiak@uni.lodz.pl).
2 Faculty of Economics and Sociology, University of Lodz, Lodz, Poland (monika.a.bolek@gmail.com).
3 Faculty of Economics and Sociology, University of Lodz, Lodz, Poland (mmalaczewski@uni.lodz.pl).
4 Faculty Economic - Sociological, University of Lodz, Lodz, Poland (martakacprzyk@op.pl).

This paper relates to the initial public offering problem and companies' profitability levels before and after this event. In the presented study, profitability ratios in the year before initial public offering increase over the previous year, and then, after the IPO, fall. This confirms the phenomenon of distorting the level of profit before the IPO and partially equity dilution after the IPO.

Keywords: window dressing, ROE, ROA, IPO, corporate finance, capital market
JEL classification: G14, G15, G32

Published: January 1, 2016  Show citation

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Pastusiak, R., Bolek, M., Malaczewski, M., & Kacprzyk, M. (2016). Company Profitability Before and After IPO. Is it a Windows Dressing or Equity Dilution Effect? Prague Economic Papers, 25(1), 112-124. doi: 10.18267/j.pep.540
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